DAILY MORNING NOTE | 1 February 2024

Trades Initiated in the past week

Factsheets


Singapore shares ended slightly higher on Wednesday (Jan 31), as investors awaited guidance from the Federal Reserve on the interest rate cut trajectory. Singapore shares rose 0.1 per cent or 2.97 points to 3,153.01. Across the broader market, losers outnumbered gainers 310 to 224, after 1.7 billion securities worth S$1.3 billion changed hands. The Hang Seng Index lost 1.4 per cent and the Kospi Composite Index slipped 0.1 per cent. Meanwhile, the Nikkei 225 advanced 0.6 per cent and the FTSE Bursa Malaysia KLCI inched up 0.02 per cent.

US stocks fell on Wednesday after Federal Reserve chairman Jerome Powell said the central bank likely wouldn’t be ready to cut rates in March. The Dow Jones Industrial Average fell 317.01 points, or 0.82% to close at 38,150.30. The S&P 500 fell 1.61% to 4,845.65. The Nasdaq Composite lost 2.23% to finish the session at 15,164.01.

Top gainers & losers

Factsheets


Events Of The Week

Factsheets


SG

Rising costs in the construction sector sent mainboard-listed Keong Hong Holdings deeper into the red for FY2023. The company saw its net loss widen 7.8 per cent to S$49.5 million for the year ended Sep 30, 2023. On a per-share basis, Keong Hong’s FY2023 loss widened to 21.06 Singapore cents, from 19.53 cents. This came even as its full-year revenue rose 18.9 per cent to S$176 million, as the company progressed in ongoing construction projects and saw greater productivity. It also recorded a one-off gain from the sale of two investment properties in Osaka, Japan. Its shares ended Wednesday flat at S$0.16.

Pegasus Asia on Wednesday (Jan 31) announced that the final redemption value for its Class A shares is S$5.0274564 per share. The payment of the redemption amount will be made on Feb 13 or around that date, Pegasus said in a separate bourse filing on Jan 26. Following that, Pegasus is expected to be delisted from the Singapore Exchange with effect from 9am on Feb 14. Pegasus Asia was one of three special purpose acquisition companies (Spacs) to list on the Singapore Exchange in January 2022, alongside Novo Tellus Alpha Acquisition and Vertex Technology Acquisition Corporation.

Daiwa House Logistics Trust (DHLT) has entered into an agreement to acquire a freehold two-storey warehouse in Japan for 2.6 billion yen (S$24.1 million) from its sponsor, Daiwa House Industry. The purchase consideration is 18.1 per cent lower than the average of two independent valuations of the property – which was at S$29.4 million – and the move shows support from the sponsor, said the manager in a bourse filing on Wednesday (Jan 31). The multi-tenanted property has a net lettable area of 13,421 sq m and a 100 per cent occupancy rate. The entire property is leased to listed food products wholesaler Mitsubishi Shokuhin, an existing tenant in DHLT’s portfolio. The lease term for the building is four years from Feb 1, 2023.

IREIT Global has secured two new leases in France and Germany. The manager of the Europe-focused Reit said in a Wednesday (Jan 31) bourse filing that the first is a lease extension for its 17 retail properties in France under the discount retailer B&M. The properties’ sole tenant has agreed to extend its leases by 3.8 years on average, bringing the weighted average lease expiry (WALE) of the 17 properties to 7.7 years. This will add over 22 million euros (S$32 million) of cash flow to IReit’s portfolio, said the manager. The second lease is a 10-year agreement with a tenant for two office floors at the Munster North building in Germany. The new tenant – a major provider of mobile roof antennas in Germany – replaces existing occupant Deutsche Telekom when it leaves in the first quarter of 2024. The rents are maintained at similar rates as the passing rents for Deutsche Telekom’s lease.


US

Oil prices settled lower on Wednesday (Jan 31), pressured by low economic activity in leading crude importer China and a surprise build in United States crude inventories as producers ramped up output following frigid weather this month. Brent crude futures for March, which expire on Wednesday, settled down US$1.16, or about 1.4 per cent, to US$81.71 a barrel while the more actively traded April contract settled down US$1.89, or about 2.3 per cent, at US$80.55. US West Texas Intermediate crude futures settled down US$1.97, or roughly 2.5 per cent, to US$75.85. Both benchmarks fell by more than US$2 a barrel earlier in the session.

The Federal Reserve held interest rates steady for a fourth straight meeting and signalled an openness to cutting them, though Fed chair Jerome Powell threw cold water on investors’ hopes that reductions would begin in March. The central bank’s policy-making Federal Open Market Committee (FOMC) showed it is in no rush to reduce rates, noting in a statement on Wednesday (Jan 31) that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2 per cent”. Powell reinforced this message by saying, “Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting.”

Qualcomm reported fiscal first-quarter results on Wednesday that topped analysts’ estimates as sales of handset chips jumped 16% from a year earlier. Revenue for the quarter came in at $9.92 billion versus the consensus estimate of $9.51 billion. Net income rose 24% during the quarter to $2.77 billion, or $2.46 per share, from $2.24 billion, or $1.98 per share, a year ago. Qualcomm said it shipped $6.69 billion in handset chips during the December quarter, up 16% year over year, a positive sign for the smartphone market after two years of declines. For the current quarter, Qualcomm said it expects adjusted earnings of between $1.73 and $1.93 per share on revenue of $8.9 billion to $9.7 billion. Consensus expectations, according to LSEG, were for earnings of $2.25 per share on $9.3 billion of revenue.

Vaccine maker Novavax said on Wednesday (Jan 31) it will reduce its total global workforce by about 12 per cent as part of its ongoing efforts to reduce costs. The company said the job cuts would impact both full-time employees and contractors. Once completed, Novavax’s workforce would be about 30 per cent lower compared with its workforce at the end of the first quarter of 2023. The vaccine maker had 1,992 full-time employees as of Feb 21, 2023, according to the latest annual regulatory filing. Novavax said the decision is part of its intention to bring down its expenses below US$750 million this year, which the vaccine maker had disclosed during its third-quarter earnings call in November.

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


RESEARCH REPORTS

Singapore Air Transport Jan 24 – Peaking travel demand

Recommendation: Underweight

Target Price: n.a; Analyst: Peggy Mak

– SIA share price gained 1.8% in Jan, ahead of the 3Q24 earnings report to be announced on 20 Feb. Passenger volume in the seasonally strong quarter rose 19% YoY, slower than 2Q24’s +29% growth.

– SIA passenger load factor in Dec fell 0.3% YoY, the first decline since Sep 2021. This could lead to lower fares to fill seats. Cargo volume returned to negative growth in Dec (-0.9%) after 4 months of YoY gains. We expect travel demand to ease after the Dec peak quarter. Cargo recovery is clouded by weaker economic conditions and lower manufacturing output from Asia.

– We are UNDERWEIGHT on air transportation.

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