DAILY MORNING NOTE | 1 November 2023

Singapore stocks closed higher on Tuesday (Oct 31) amid mixed trading in regional markets. The Index rose 0.1% or 3.45 points to close at 3,067.74.Frasers Logistics & Commercial Trust led the index gainers, climbing 3 per cent to close at S$1.04. Other top performers include Venture Corp, which rose 2.5 per cent, and Mapletree Pan Asia Commercial Trust, which climbed 2.3 per cent.

WALL Street stocks advanced on Tuesday for the second straight session, shrugging off early weakness ahead of a Federal Reserve decision. The Dow Jones Industrial Average finished up 0.4 per cent at 33,052.87. S&P 500 gained 0.7 per cent to 4,193.80, while the tech-rich Nasdaq Composite Index advanced 0.5 per cent to 12,851.24.

SG

EC World Reit said on Tuesday (Oct 31) that one of its major tenants, China Tobacco, would not be renewing one of its two leases at Hengde Logistics, a warehouse property in EC World Reit’s portfolio. The manager of the Reit said via a bourse filing that the company has decided to discontinue the lease, despite active negotiations with China Tobacco.

Paragon Reit’s gross revenue grew 1.2% to S$215.6 million over the first three quarters of its financial year ended on Sep 30, from S$213.1 million over the same corresponding period last year. In local currency terms, gross revenue for its Singapore increased 2.4% , while its Australia assets’ revenue rose 5.4% over the same period.

CapitaLand Investment has partnered Thai real estate developer Pruksa Holding (PSH) to set up a healthcare and wellness fund to the tune of S$1 billion. The two parties have so far committed a total initial investment of S$350 million to the CapitaLand Wellness Fund (C-Well), which has funds under management of S$1 billion.

Japfa reported a net loss of US$22.7 million for the first nine months ended Sep 30, 2023, reversing from a net profit of US$46.3 million from the same period a year ago. Revenue was down by a marginal 1 per cent year on year to US$3.3 billion for 9M FY2023. This brought loss per share for the period to 1.11 US cents.

US

Pfizer on Tuesday (Oct 31) reported its first quarterly loss since 2019, as demand fell for its Covid products and it recorded a hefty charge mainly from the US government returning millions of doses of its antiviral treatment Paxlovid. The company recorded a US$5.6 billion charge in the third quarter related to Paxlovid and vaccine Comirnaty, most of which was disclosed earlier this month.

Stellantis said the prolonged strikes that curbed output at its North American facilities cost the Jeep maker around 3 billion euros (S$4.36 billion) in revenue. Pre-tax operating profit during the walkout period was negatively impacted by under 750 million euros. It still reported better-than-expected third-quarter revenue, bolstered by stable pricing, improving logistics and robust demand for models such as the electric Jeep Avenger.

BP’s third-quarter profit rebounded from the prior period, but fell short of estimates as weak results in gas marketing offset a strong performance in oil trading. The huge cash inflows have stimulated a spate of dealmaking, with ExxonMobil and Chevron announcing a pair of acquisitions totalling more than US$100 billion over the past month – widening their lead over Europe’s majors.

Samsung Electronics said on Tuesday that its operating profits for the July to September period were down 77.57 per cent from the year before, even as new smartphone releases boosted revenue. The company announced third-quarter operating profits of S$2.32 billion based on strong sales of flagship models in mobile and strong demand for displays.

Prada reported a 10 per cent rise in third quarter revenues on Tuesday (Oct 31) as a strong performance in Asia and Europe helped to compensate for weakness in the Americas. For the first nine months of the year net revenues totalled S$4.8 billion, a rise of 17% at constant exchange rates, with the ready-to-wear category showing the fastest growth and the Miu Miu brand also expanding rapidly.

Shares of Nvidia Corp dropped by nearly 5% to a nearly five-month-low on Tuesday (Oct 31) following a report that the artificial intelligence (AI) giant may be forced to cancel up to US$5 billion worth of advanced chip orders to China in compliance with new US government restrictions.

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

RESEARCH REPORTS

CapitaLand Ascott Trust – Occupancy to trend upwards

Recommendation: Buy (Upgraded), Last Done: S$0.90

Target price: S$1.04, Analyst: Darren Chan

– 3Q23 gross profit rose 13% YoY to reach 103% of pre-COVID 3Q19 levels.

– 3Q23 portfolio RevPAU rose 17% YoY to S$154, reaching 102% of pre-COVID 3Q19 levels on the continued improvement in portfolio occupancy (77% vs 70% in 3Q22) and average daily rates (ADR). We expect effective borrowing cost to rise from 2.4% in 3Q23 to c.3% for FY24e after refinancing all loans due in FY24.

– Upgrade from ACCUMULATE to BUY due to recent share price performance, DDM-TP lowered from S$1.20 to S$1.04. FY23e/FY24e DPU is lowered by 6%/14% after accounting for the higher share base (+9%) from the equity fund-raising exercise, proposed acquisitions, and higher finance costs. CLAS remains our top pick in the sector owing to its mix of stable and growth income and geographical diversification. Growth in RevPAU going forward will come from higher portfolio occupancy. The current share price implies an FY23e/24e dividend yield of 6.6%.

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