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Mr Ong Hwee Li
Welcome to the fourth issue of the SAC Newsletter!
The first half of 2019 has seen certain recurring issues that we have seen in 2018 such as the trade war between US and China and ongoing uncertainties between the ongoing negotiations between the United Kingdom and the European Union over the Brexit deal. Geopolitical uncertainties also dominated headlines as tensions between Japan and South Korea have led to increasing tensions between the two sides. Despite the geopolitical uncertainties, the STI closed the first half of 2019 higher by 8.2% year-to-date.
In the past six months, we completed the reverse takeover (“RTO”) of TSH Corporation Limited and Reclaims Global Limited’s IPO which raised S$4.6 million. We also completed the RTO of Lereno Bio-Chem, the specific interested party transaction mandate of Samko Timber and acted in the capacity of financial advisor and independent financial advisor to the partial offer for Sevak Limited and the voluntary cash offer for Boardroom Limited respectively. We have also successfully hosted and completed our third Corporate Day on the 28th March with five SGX-listed companies that saw about 100 institutional investors and high net worth individuals participating in the event. We strive to continuously bridge investor’s with under-covered companies on SGX, and will be hosting our next Corporate Day on the 27th August (Tuesday), we look forward to catching up with you soon.
2019 also saw the launch of our own fund management arm, SAC Investment Management (“SACIM”). We are pleased that we have received close to S$20 million in committed capital, and we have plans to hit at least S$30 million for our maiden fund. Going forward, we have further plans to continue launching more funds to complement our overall offerings to corporates and generate returns for our investors.
Our young Research team have also added five (5) new companies to their existing coverage with three (3) initiation publications and two (2) non-rated publications in the first half of 2019. We will look to further expand our research coverage in the second half of the year, so stay tune to our research and future newsletter. Thank you!
Ong Hwee Li
Market Update
Despite the continued threat of an escalating trade war between the US and China in the first half of 2019 and rising geopolitical tension between the US and Iran, the US market still rallied by over 16% in the first half of 2019. The stock market rally however, belie the overall subdued global economic growth. Against this backdrop, the International Monetary Fund ("IMF") has lowered their 2019 forecast by 10 basis points to 3.2%.

The S&P 500 rallied 16.2% for the first half of 2019, making this the best first half for the US since 1997. The rally was helped partly by the de-escalation of trade tensions following the Group of 20 ("G20") meeting in June, and a signal from the US Federal Reserve that they will be looking to cut interest rates to stimulate growth. Last month, the US Commerce department reported that US economic growth slowed in the second quarter of 2019 as trade disputes and a global slowdown took their toll. In the second quarter, US GDP grew at 2.1%, lower than the 3.1% growth from the first quarter. Accordingly, the US Commerce department has pegged back growth expectations for 2019. The silver lining however, is that US employment numbers have remained resilient, adding 172,000 jobs a month on average this year vs. last year's average of 223,000, resulting in unemployment rate being at a low of 3.8%.

In Europe, the Eurozone economy entered into a slower growth trajectory with 2Q19 GDP at 0.2% vs. 0.4% from last year.
The feeble economic backdrop is also hitting corporations in Europe, particularly carmakers, with downbeat statements recently from companies including Germany's Daimler and France's Renault. European Central Bank's ("ECB") President Mario Draghi pulled no punches when he said in a press meeting that the economic outlook is "getting worse and worse". In view of the persistently weak inflation and growth in the Eurozone, Mario Draghi has floated the possibility of further rate cuts to support the economy. In the second half of 2019, we think investor's will continue to monitor the ECB's policy decision to support growth.

In Japan, a quarterly report released by the Bank of Japan ("BOJ") on the outlook highlighted that risks to the economy were skewed to the downside due to increasing overseas uncertainty, the report also cut its inflation forecasts for the year. The BOJ has committed to keep interest rates at ultra low levels at least until the first quarter of 2020, and a line in its policy statement that it will ramp up stimulus without hesitation "if there is a chance the momentum for hitting its price target is lost". In our view, the strong language in their policy statements while intended to calm the financial markets, highlight the increasing risk the BOJ see in the economic outlook of Japan. The government has cut its fiscal 2019 real GDP growth forecast to 0.9% from 1.3% previously.

The world’s second largest economy, China is also experiencing a continued slowdown in it's economy as the economy continues to see the effects of a slowdown from the trade war with the US. In the second quarter of this year, China's Q2 GDP growth at 6.2% was the weakest in 27 years. The growth data marks a continued slowdown from Q1's GDP growth of 6.4%. Unlike the other developed economies however, China has stronger tools in it's arsenal to shore up the economy. Since 2018, China has already slashed the reserve requirement ratios six times to free up more funds for the economy. Beijing has relied largely on fiscal stimulus to underpin growth this year, announcing massive tax cuts worth nearly two trillion yuan (US$291 billion) and a quota of 2.15 trillion yuan for special bond issuance by local governments aimed at boosting infrastructure construction. These moves however, appeared to have little effect in stemming the slow down, the latest Caixin/Markit factory Purchasing Manager's Index came in at 49.9 indicating a contraction in manufacturing activity.

Despite the turbulence facing the ASEAN economy, ASEAN has fared relatively well so far. In the first quarter of 2019, Indonesia, Malaysia  and Vietnam recorded 5.1%, 4.5%, and 6.8% growth respectively. Whether this growth can be sustained however, remains to be seen as global headwinds like the US-China trade war will continue to put a strain on developing economies. A study done by S. Rajaratnam School of International Studies found that while trade diversion effect (in which businesses relocate their manufacturing facilities and activities from China to other low cost countries) could benefit some ASEAN countries such as Vietnam and Cambodia, the overall uncertainty is still expected to weigh on the economies here.

Back at home, flash estimates by the Ministry of Trade and Industry pegged Singapore's economic growth by just 0.1% in the second quarter of this year, lowest in a decade, and worse than the 1.1% growth expected by economists. The latest figures showed weakness across key sectors, with all contracting from the first quarter of the year. Manufacturing shrank 6% from the previous quarter, while construction contracted by 7.6% and services by 1.5%. In view of the slowdown, the market is now anticipating a review and a possible downward revision of the 1.5% to 2.5% GDP growth forecast for the year as the ongoing macro uncertainties weigh on Singapore's economy.

Going forward, expectations are rising that the Singapore economy is going to enter into a technical recession. This is in line with the slowing growth rates seen in most of the major advanced economies owing to the impact of the ongoing trade conflicts between the US and its key trading partners. The manufacturing sector is likely to further wane against the backdrop of trade tensions that continues to worsen disruptions to supply chains. Likewise, the outward-oriented services sectors are likely to grow at a more moderate pace and stay resilient due to the lower demand from key advanced and regional economies. MAS also could potentially embark on a slight easing policy to support growth. In all, we think the Singapore economy may be projected to grow at 0.5% to 1%, slower than the 3.3% full year growth in 2018.
Research Initiation Publications

ISOTeam Ltd
Enhance, Create and Sustain
30 July 2019

ISOTeam Ltd. is an established and leading player in Singapore’s building maintenance and estate upgrading industry. The Group also offers a full range of services and solutions comprising specialist Coating & Painting (“C&P”) services as well as complementary niche servicesRead more...

BRC Asia Limited
Market Leader in Steel Reinforcement
25 July 2019

BRC Asia is an established pioneer in prefabricated steel reinforcement. Since their incorporation in 1938, they have developed their expertise to become a leading steel reinforcement solutions provider in Singapore. Today, they have operations in Singapore,  Malaysia and China. Read more...

Hatten Land Limited
Integrated Property and Tourist Development Developer
22 May 2019

Hatten Land is a leading property developer in Malaysia of integrated residential, hotel and commercial developments. They were listed on the Catalist Board of Singapore Exchange on 28 February 2017 through a reverse takeover (“RTO”) of VGO Corp. Read more...
Research Non-Rated Publications

KTMG Limited
An experienced vertically integrated apparel manufacturer

28 June 2019

KTMG Limited engages primarily in the business of contract manufacturing of apparels, specialising in the manufacturing of nightwear, lounge wear, casual wear and plus sizes apparels in manufacturing facilities in Malaysia and Cambodia. The Group is currently expanding upstream into the knitting, dyeing, printing and finishing of fabric. Read more...

BRC Asia Limited
Market Leader in Steel Reinforcement
21 May 2019

BRC Asia is an established pioneer in prefabricated steel reinforcement. Since their incorporation in 1938, they have developed their expertise to become a leading steel reinforcement solutions provider in Singapore. Today, they have operations in Singapore,  Malaysia and China. Read more...

Choo Chiang Limited
The one-stop provider for electrical works

18 March 2019

Choo Chiang Holdings Ltd. has established itself as one of the leading retailer and distributor of electrical products and accessories in Singapore. With a retail presence of more than 20 years, it offers an extensive range of products from over 30 well established third-party brands, as well as from its own proprietary brands through its 10 retail branches which are strategically located across different parts of Singapore. In addition to the distribution business, the Group also supplements its income through the property investment segment. It currently holds 12 investment properties which are rented out for rental income. Read more...

ISOTeam Ltd
Enhance, Create and Sustain
21 February 2019

ISOTeam Ltd. is an established and leading player in Singapore’s building maintenance and estate upgrading industry. The Group also offers a full range of services and solutions comprising specialist Coating & Painting (“C&P”) services as well as complementary niche servicesRead more...
Our Activities

SAC Investment Management Launch

SAC-NUS Bursary Awards Ceremony

SGX-SAC Corporate Access Symposium (March 2019)

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Connect with Us
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IPOs and RTOs

Proposed Acqusition of the entire issued share capital of Knit Textile and Apparel Pte. Ltd., being a Reverse Takeover
May 2019

Issue Manager, Underwriter, Placement Agent and Sponsor
Amount raised: S$4,600,000
Market Cap at Listing: S$30,100,000
March 2019

Proposed Acquisition of the entire issued share capital of Sloshed! Pte. Ltd., being
a Reverse Takeover and an Interested Person Transaction

February 2019
Financial Advisory

Independent Adviser for Voluntary Unconditional Cash Offer

June 2019

Financial Adviser for the Voluntary Conditional Partial Cash Offer in Sevak Limited

May 2019

Independent Financial Adviser for Proposed IPT Specific Mandate

April 2019
Research Updates Publications
Kim Heng Offshore & Marine Holdings Limited
Flash Note: Memorandum of Understanding signed with Hung Hua Construction and Thaitan Drilling
20 June 2019

Sanli Environmental Limited
Update Report: FY2019 earnings impacted by competition at O&M 
10 June 2019

United Global Limited
Update Report: United Global 1Q19 results review
22 May 2019

Interra Resources Limited
Update Report: Revenue increased 36% year-on-year with Group turning in a profit 
14 May 2019

Kim Heng Offshore & Marine Holdings Limited
Flash Note: Q1 revenue jumped 139%, turned profitable for latest quarter
26 April 2019

SLB Development Ltd
Update Report: SLB 3Q19 results review
22 April 2019

Sanli Environmental Limited
Flash Note: Sanli’s order book rose to S$198.0 million
5 April 2019

Advancer Global Limited
Update Report: FY2018 Results Review
21 March 2019

Acromec Limited
Flash Note: Won contract of S$7.6 million for M&E works in the construction of a poultry farm for Chew’s Agriculture

20 March 2019

Hong Lai Huat Group Limited
Update Report: FY18 profit up 287% on strong property sales in Cambodia 
4 March 2019

Interra Resources Limited
Update Report: Interra’s FY18 profit ahead of our estimates by 83.2% 
1 March 2019

United Global Limited
Update Report: 4Q18 profit after tax rose 2.9%, FY18 profit 4.3% above our estimates
27 February 2019

Megachem Limited
Update Report: FY2018 core net profit before tax increased 36.3% led by broad based increase in revenues 
25 February 2019

Interra Resources Limited
Flash Note: Myanmar Drilling Update: Chauk Development Well CHK 1213

28 January 2019

Megachem Limited 
Update Report: Megachem Site Visit Notes
24 January 2019

Sanli Environmental Limited 
Flash Note: Sanli secured S$51.5 million worth of contracts from the PUB
23 January 2019

SLB Development Ltd
Update Report: SLB 2Q19 results review
18 January 2019

SAC Knowledge Hub Publications

Brain-Computer Interface
18 June 2019
In today’s digital age, smartphones have taken the world by storm. People do pretty much everything on their smartphones, like communication, shopping, play games and even banking, but all these are done with users hopping from one app to another. Progressively, the movement towards a one-stop solution that opens up several functions in a single click starts to become more appealing as people look for simplicity and ease of use. In China, this idea of combining the ability to communicate, shop online, order rides, read books, play games, get food delivery and pay for anything within a single, unified smartphone app started to take shape with the rise of the world’s first Super App – WeChat. Soon enough, a similar trend started to unfold in South East Asia as ride-hailing services Grab and GoJek further their Super App ambitions across the region and achieve their decacorns status (defined as fintechs valued above US$10 billion). Now, the world has started to take notice of this latest Asian’s innovation and many apps wonder if they can too become a Super App.
About SAC Capital
SAC Capital enjoys a long-standing reputation as a specialist in corporate finance, and we have been a trusted advisor to our clients and partners since 2004.

As an expert in the small-medium enterprise space across various disciplines – Initial Public Offerings (IPOs), mergers and acquisitions (M&As), corporate transactions for listed companies, underwriting and share placement, fund raising and Catalist Sponsorship – we understand our clients’ needs very well, and we are able to steer them in the right direction.

Financial Advisory
We provide financial advisory services for corporate exercises, taking into account the various compliance requirements, working alongside our clients to achieve their objectives.

Acting as Financial Adviser or Independent Financial Adviser, we have wide ranging experiences spanning Reverse Takeovers, General Offers, Interested Person Transactions, Delisting and IPO Pre-Clearances. To date, we have completed more than 130 advisory engagements which gives us in depth knowledge of a broad spectrum of corporate advisory services.

Fundraising, M&A and Underwriting 
Our Capital Markets (CM) units assists our clients in fund-raising activities in both private and public equity markets. Our services include IPOs, secondary placements, rights issues, convertible bonds, pre-IPO financing, strategic equity and M&A. We deal with each client’s specific requirements and provide customised capital markets solutions.

We are a leading placement agent and underwriter of equity and equity-linked offerings in Singapore, having completed offerings in the Lifestyle, Consumers, Healthcare, Technology, Media and Telecom (TMT), Real Estate, Manufacturing, Mineral, Oil and Gas (MOG) and Specialised Engineering sectors. Notwithstanding the above, the ECM unit is sector agnostic with a wide range of expertise. ECM also assists our clients in their communications with the equity markets.

Mainboard & Catalist Listing
We advise our clients on equity fund raising which includes IPOs. Our work involves advising on, amongst others, restructuring exercises and compliance requirements of the Singapore Exchange and other regulatory authorities for the purpose of equity fund raising.

We also advise on Reverse Takeovers and secondary listings. We seek to understand our client’s long term business plan and strategy so as to provide the appropriate advice to tailor to their needs and requirements.

Catalist Sponsorship
SAC Capital is one of the leaders in the market in the Catalist Sponsorship space, with a view to support the growth of our sponsored issuers. Our principal scope of services as a Catalist Sponsor is to advise and guide our sponsored issuers in relation to their continuing listing obligations, on an ongoing basis under the Catalist Rules. Our experienced team of professionals work closely with the directors and management team of the sponsored issuers and assist them in disclosure and compliance matters for corporate actions and developments. 

With comprehensive knowledge of the local capital market, our experience and access to information means that the company is well placed to produce research reports. We seek to fill the gap in the industry where there is minimal research coverage for small and medium enterprises (SMEs) listed on the SGX. SAC Advisors aims to provide a platform which assists investors in making informed decisions when investing in these high-growth small/medium companies while promoting awareness and educating the general public of the merits of investing in listed SMEs. 
Copyright © 2019 SAC Capital Private Limited.
All rights reserved.

This material has been prepared for the purpose of general circulation. We have not had regard to the specific investment objectives, financial situation, tax position or unique needs and constraints of any individual person or any specific group of persons and does not purport to be comprehensive or contain all necessary information which a prospective investor may require in arriving at an investment decision. Any prospective investor should perform his own due diligence. Advice should be sought from a financial adviser regarding suitability, taking into account the specific investment objectives, financial situation or particular needs of the person in receipt of the recommendation, before a commitment to purchase is entered into. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities.

Our opinion and facts set out in this report are based on the market, economic, industry and other applicable conditions prevailing as at the date of the preparation of this newsletter. Such conditions may change significantly over a relatively short period of time and we assume no responsibility to update, revise or reaffirm our opinion in light of any development subsequent to the publication of this newsletter, that may or may not have affected our opinion and the contents contained herein.