Singapore stock wrap: JMH, ComfortDelGro

• The Straits Times Index closed nearly 1% this week, as market sentiments improved on the back of a new US$1.9 trillion fiscal stimulus package
• Jardine Matheson Holdings (SGX: J36) saw share price close nearly 20% higher, following the acquisition of Jardine Strategic Holdings earlier this week
• ComfortDelGro Corp closed 5% up, after analysts said a new financing model could help its rail business swing back into the black ‘almost immediately’
• Trade Singapore shares, long or short, with an IG account

Jardine Matheson Holdings (SGX: J36)

Jardine Matheson Holdings (JMH) shares closed nearly 20% higher this week, after the group said it will acquire the remaining 15% of Jardine Strategic Holdings (JSH) for US$33 in cash per ordinary share in a US$5.5 billion stake purchase.

On Monday (08 March 2021) morning, JMH shares rose 7.5% following the announcement, while JSH shares opened 36% higher.

The acquisition price of US$33 is 20% higher than JSH’s closing price on 05 March 2021, and at a 29% premium to the stock’s volume-weighted average closing price over the past month.

But it is still at a 19% discount to the value of its listed assets, said United First Partner’s head of Asian research Justin Tang.

He added that the simplified corporate structure could drive the group’s other stocks to trade higher, which will raise JSH’s fair value.

Analyst Brian Freitas, who publishes on Smartkarma, said the offer price was at a 30% discount to JSH’s estimated net asset value of US$46.67 per share.

Asset manager Value Square believes that as a long-term shareholder it will be ‘deprived’ of the Jardine group’s future profits, even though it can reap a short-term gain.

On completion, JMH will become the single holding company for its subsidiaries, thus improving operational efficiency and financial flexibility. The deal is slated to take effect by end-April.

ComfortDelGro (SGX: C52)

ComfortDelGro shares closed 5% higher this week, as market sentiment improved on its rail business.

Last Friday (05 March), the Singapore government said it will review the financing framework for the Downtown Line (DTL) to possibly minimise the commercial risk for the rail operator, SBS Transit.

The underground MRT line is currently on a fixed-fee framework, known as the New Rail Financing Framework (NRFF) 1. Under this structure, SBS paid a licence fee of about S$20 million in FY2020 to operate DTL, and bears the fare revenue risk, which varies depending on rail ridership.

There is a possibility that the government could drop NRFF 1 for DTL and instead implement the risk-sharing model, or NRFF 2, The Business Times reported.

In the risk-sharing model, the government can protect the train line’s operator against excessive losses, reduce commercial volatility, but cap operators’ high profits. This is presently used for the North-South, East-West, Circle and North-East MRT Lines.

Another framework, NRFF 3, places the entire revenue risk on the government, which receives all fare revenues but pays the operator a fee to run the rail line. This is applied temporarily during the initial phase, when ridership is hard to predict.

Analysts have commented that ComfortDelGro’s railway business will swing back into the black ‘almost immediately’ with the third financing model.

How to trade Singapore stocks

Are you feeling bullish or bearish on these Singapore blue-chip stocks?

Either way you can buy (long) or sell (short) the asset using IG's industry-leading trading platform, by investing in the shares directly, in a few easy steps:

1. Create a live or demo IG Trading Account, or log in to your existing account
2. Enter <company name (i.e. Jardine Matheson Holdings> in the search bar and select the instrument
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade