19 March 2024

Trades Initiated in the past week

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Singapore stocks end flat on Monday ahead of Fed interest rate announcement. Seatrium closed at S$0.081 – a 52-week low – and 9 per cent or S$0.008 lower. Peggy Mak, research manager at Phillip Securities Research, however, noted from Seatrium’s recent Investor Day that its net debt target suggests net borrowings are expected to rise to S$2-3 billion from S$750 million at end-2023. She said that unless the order book can rise at the same pace or faster – order book was S$16 billion as at 2023 – “taking on more debt in an environment where interest costs are higher year on year does not bode well for margins”. The counter saw some 1.8 billion shares transacted on Monday, accounting for more than half of the bourse’s trading volume of over three billion securities with a total value of S$968.5 million. Philippine alcohol maker Emperador was up 8.8 per cent or S$0.035 to S$0.435 despite having been dropped from the STI at the market open on Monday, after a review of the bourse constituents.

Tech shares led the market higher on Monday on another round of artificial intelligence enthusiasm as investors looked ahead to a Federal Reserve meeting. The tech-rich Nasdaq Composite Index finished up 0.8 per cent at 16,103.45. The Dow Jones Industrial Average gained 0.2 per cent to 38,790.43, while the broad-based S&P 500 climbed 0.6 per cent to 5,149.42. Google-parent Alphabet also got an AI-related lift, rising 4.4 per cent following a Bloomberg report that Apple was in talks to build Google’s Gemini artificial intelligence platform into its smartphones.

Top gainers & losers

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Events Of The Week

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SG

Singapore stocks end flat on Monday ahead of Fed interest rate announcement. Seatrium closed at S$0.081 – a 52-week low – and 9 per cent or S$0.008 lower. Peggy Mak, research manager at Phillip Securities Research, however, noted from Seatrium’s recent Investor Day that its net debt target suggests net borrowings are expected to rise to S$2-3 billion from S$750 million at end-2023. She said that unless the order book can rise at the same pace or faster – order book was S$16 billion as at 2023 – “taking on more debt in an environment where interest costs are higher year on year does not bode well for margins”. The counter saw some 1.8 billion shares transacted on Monday, accounting for more than half of the bourse’s trading volume of over three billion securities with a total value of S$968.5 million. Philippine alcohol maker Emperador was up 8.8 per cent or S$0.035 to S$0.435 despite having been dropped from the STI at the market open on Monday, after a review of the bourse constituents.

Shares of integrated resort operator Genting Singapore barely shifted hours after the Chinese government issued a public reminder on WeChat for Chinese citizens to “stay away from gambling”. In a public notice posted on its account on the Tencent-owned app at 10.54 am on Monday (Mar 18), the Chinese embassy in Singapore reminded its nationals that if they take part in cross-border gambling, they are breaking China’s laws and will be held accountable – even if the casinos in the Republic are legal operations. The notice also encouraged those with information on Chinese citizens indulging in cross-border online gambling to report these individuals to the Chinese government. At that time, the shares of Genting Singapore had dipped only a marginal S$0.005 or 0.6 per cent to S$0.88. Earlier, the counter had mainly traded range-bound between this level and S$0.895, which represented an increase of S$0.01 or 1.1 per cent. At the close of trading on Monday, Genting Singapore shares were down S$0.005 or 0.6 per cent to S$0.88.

Acro Harvest Engineering, a wholly-owned subsidiary of AcroMeta Group, has proposed the sale of its office unit at Unity Centre for a purchase consideration of $940,000. The property, which is approximately 3,681 square feet with a lease expiry in March 2057, is currently used by Acro Harvest as its office and workshop. In terms of rationale, AcroMeta says it decided to proceed with the proposed disposal after a strategic review of the financial position, operational needs and long-term business expansion strategy and direction of the group. While the bank valuation price for the property is in the range of $1.0 million to $1.1 million, the group still stands to make a profit of $425,000 from the proposed disposal. The net proceeds from the proposed sale would support the group’s operating cash flows and business expansion plans, including investments in the co-working laboratory business.


US

Walt Disney on Monday (Mar 18) received a critical endorsement from a proxy advisory firm which can sway investor voting when Glass Lewis urged shareholders to re-elect all of the company’s directors. The recommendation dealt a blow to Trian Fund Management and Blackwells Capital as the two hedge funds argue the company needs new blood in the boardroom to reinvigorate the entertainment giant. Glass Lewis said recent earnings reports show Disney is making progress and that the two hedge funds have not proposed better ideas to improve operations.

Super Micro Computer, which joins the S&P 500 on Monday (Mar 18), enjoys a rare advantage among server makers that are trying to tap the generative AI boom – close ties with Nvidia that help it launch products faster than rivals Dell and Hewlett Packard Enterprise. The company has historically been among the first to receive artificial intelligence chips from Nvidia and Advanced Micro Devices as it helps them check server prototypes, giving it a head start over rivals, analysts and industry experts said. That has helped turn the company into a key supplier of servers essential for generative AI apps and sent Super Micro’s shares up 289 per cent so far this year. Super Micro’s revenue more than doubled in the last three months of 2023 and analysts polled by LSEG expect triple-digit percentage growth to continue till at least the September quarter of 2024.

Artificial intelligence semiconductor powerhouse Nvidia kicks off its annual developer conference on Monday (Mar 18), with investors focused on new chip announcements from chief executive Jensen Huang in an afternoon keynote address. Nvidia’s new chip and software announcements at GTC 2024 will help determine whether Nvidia can maintain its leadership position as the dominant seller of the tools needed to fuel the past year’s frenzy around AI. Nvidia dominates the data centre AI chip market, capturing roughly an 80 per cent share last year. Nvidia’s market share is expected to drop several percentage points in 2024 as new products from rivals such as Intel and Advanced Micro Devices hit the market. Huang is expected to announce the next generation of AI processors designed by the company. The forthcoming B100 chip is expected to include significant improvements over its predecessor, the H100. Though Nvidia is widely regarded as a chip designer, the company has built a significant battery of software products as well, and Huang is expected to unveil a swath of new products related to software on Monday. Nvidia said earlier this year its software and services business had reached an annual run rate of US$1 billion by the end of the company’s last fiscal year.

Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR


RESEARCH REPORTS

Adobe Inc – Revenue growth to decelerate

Recommendation: REDUCE (Maintained); TP: US$465.00; Last Close: US$492.46

Analyst: Ambrish Shah

– 1Q24 revenue/adj. PATMI was in line with expectations at 24%/25% of our FY24e forecasts. Adj. PATMI increased 17% YoY to US$2bn due to higher operating leverage.

– For 2Q24e, Adobe expects adj. EPS of US$4.38 (up 12% YoY) on revenue of US$5.3bn (up 9% YoY). Digital Media segment revenue will grow 11% YoY led by higher subscription sales for its Creative Cloud and Document Cloud apps.

– Maintain REDUCE recommendation with an unchanged DCF target price of US$465 (WACC 7.3%, g 4%). No change to our forecasts, except for a one-off US$1bn termination fee related to the Figma deal. Adobe faces headwinds from increased competition and tough comparisons due to pricing actions. In addition, Firefly AI tools are unlikely to boost revenues until the end of this year as Adobe is currently focusing on enhancing customer engagement instead of immediately monetising generative tokens.

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