DAILY MORNING NOTE | 10 February 2023
Trade of the Day
Analyst: Zane Aw
(Current Price: S$1.55) – TECHNICAL BUY
Buy price: S$1.55 Stop loss: S$1.50 Take profit 1: S$1.63 Take profit 2: S$1.69
The further easing of pandemic-related restrictions in Singapore did little to quell local traders’ worries about inflation levels and the slew of upcoming corporate financial results announcements. The benchmark Straits Times Index slid 0.9 per cent or 29.04 points to end Thursday’s (Feb 9) trading session at 3,359.48. DFI Retail Group was among the top gainers on Thursday. It added 3.7 per cent or US$0.12 to US$3.34. Jardine Matheson Holdings was the biggest loser on Thursday, falling 2.1 per cent or US$1.10 to US$51.82. The trio of local banks also came up among the day’s top decliners. UOB lost 1.4 per cent or S$0.44 to S$30.40, DBS shed 0.8 per cent or S$0.27 to S$35.92, and OCBC fell 0.4 per cent or S$0.05 to S$13.10.
Wall Street stocks tumbled for a second straight session on Thursday as Treasury bond yields pushed higher, while analysts pointed to the consolidation of earlier gains. The Dow Jones Industrial Average finished down 0.7 per cent at 33,699.88. The broad-based S&P 500 declined 0.9 per cent to 4,081.50, while the tech-rich Nasdaq Composite Index dropped 1.0 per cent to 11,789.58.
Pan-United has reported earnings of $9.89 million for its 2HFY2022 ended December, down 16% compared to the previous corresponding period at $11.5 million. For the full year, however, the company reports earnings of $23.4 million, 25% higher y-o-y. Excluding discontinued operations, earnings from continuing operations increased 42% y-o-y to $27.5 million in FY2022. The increase in revenue arose as a result of higher selling prices to cover higher costs of raw materials, subcontract costs and other direct costs during the year.
F J Benjamin Holdings has posted earnings of $1.7 million for its 1HFY2023 ended December, a reversal from a net loss of $1.3 million in the previous corresponding period. The turnaround reflected higher sales volume as consumer demand returned in line with the abating of the Covid-19 pandemic. Turnover rose 26% y-o-y to $45.7 million in 1HFY2023, with sales improving in all three markets — Singapore, Indonesia and Malaysia. Gross profit margin rose to 53% in 1HFY2023 from 47% in 1HFY2022.
Dual-listed construction and engineering services provider Civmec Ltd has announced earnings of A$28.2 million ($26 million) in its 1HFY2023 ended December, 25% higher than the previous corresponding period. Revenue for the 1HFY2023 increased 7.6% y-o-y to A$418.9 million on the back of increased activity levels and the timing of projects revenue recognition. Gross profit for the period increased 22.8% y-o-y to A$51.8 million, reflecting the increase in revenue and improvement in gross profit margins from 10.8% to 12.4%. As at Dec 31, Civmec’s order book stood at A$1.7 billion. The board has declared an interim dividend of 2 Australian cents per share for the period.
Japan Foods Holding announced the Group’s revenue increased S$20.5 million or 54.1% from S$37.9 million in 9M2022 to S$58.4 million in 9M2023 in a business and financial update. The improved performance was due to the positive response to the Group’s expanded Halal segment and boosted further by the lifting of Covid-19-related capacity limits and restrictions on social gatherings, including dining-in, since 26 April 2022 compared with 9M2022 when stringent Covid-19 safe-distancing measures were still in place. Gross profit increased S$17.5 million or 54.7% from S$31.9 million in 9M2022 to S$49.4 million in 9M2023 in line with the increase in the Group’s revenue. Gross profit margin rose by 0.3 percentage point.
Wing Tai Holdings has reported earnings of $63.3 million for its 1HFY2023 ended December, 18% higher than the previous corresponding period. This is mainly due to higher share profits from its joint venture (JV) companies as well as a write-back of deferred tax provisions that is no longer required. Wing Tai’s share of profits from associated and JV companies was $33.4 million in 1HFY2023, 55% higher y-o-y on the back of higher contributions from Uniqlo in Singapore and Malaysia.
PayPal Holdings cost-savings story continued in the holiday quarter, as the digital-payments company topped profit expectations for the period. The company on Thursday posted fourth-quarter net income of $921 million, or 81 cents a share, up from $801 million, or 68 cents a share, in the year-earlier period. After adjustments, PayPal earned $1.24 a share, whereas analysts were expecting $1.20 a share. It also disclosed that its chief executive plans to step down from that role at the end of the year.
Pepsico on Thursday (Feb 9) beat analysts’ estimates for fourth-quarter revenue and profit, benefiting from price hikes for its sodas and snacks to tackle rising costs. On an adjusted basis, the company earned US$1.67 per share in the fourth quarter, beating estimates of US$1.65. PepsiCo reported net revenue of about US$28 billion, compared with estimates of US$26.84 billion. The company’s average prices jumped 16 per cent, while organic volume slipped 2 per cent. It also raised its annualised dividend by 10 per cent to US$5.06 per share.
Lyft reported on Thursday a surprise fourth-quarter loss and guidance that fell short of Wall Street estimates as margins were pressured by rising costs. Lyft reported a loss of $0.74, missing estimates for earnings of $0.15 a share, but revenue of $1.18 billion just topped consensus estimates of $1.16B. Active riders on its platform jumped 8.7% to 20.4 million in the fourth quarter from the same period last year, while revenue per active rider increased 11.5% to $57.72 year-over-year. The contribution margin fell to 35.3% from 47.1% in the quarter. For Q1, the ride-hailing company guided revenue of $975M, but that was lower than Wall Street estimates for $1.10B.
Netflix laid out plans to crack down on password sharing for accounts on its streaming platform, including setting up primary location and paying a couple of dollars for an extra member. The video-streaming giant, which has estimated that 100 million around the world use a shared account, said that members can now easily manage who has access to their account, transfer profile to a new account and still easily watch Netflix on their personal devices or log into a new TV. Members on Netflix’s standard or premium plan in many countries can add an extra member sub account for up to two people for an extra C$7.99 a month per person in Canada, NZD$7.99 in New Zealand, 3.99 euros in Portugal, and 5.99 euros in Spain, the company said.
Boeing is set to score a 15-strong order for 737 Max jets that will seat 200 passengers from Greater Bay Airlines, a person familiar with the matter said. It should start to take delivery of some of the jets, which are 20 per cent more fuel efficient than their predecessor, from mid 2024, the person said. Each 737-9 Max jet is valued at US$52.3 million based on 2022 prices, according to figures from aircraft appraiser Avitas, meaning the transaction would be worth around US$785 million.
Credit Suisse Group warned it expects a substantial loss this year after clients pulled a record amount of funds in the final three months of 2022, capping the bank’s worst annual performance since the financial crisis. The worse-than-expected net loss of 1.39 billion Swiss francs (S$2 billion) in the three months through December was driven by losses at both the key wealth division and the investment bank, Credit Suisse said on Thursday (Feb 9).
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
Recommendation: NEUTRAL (Downgraded); TP S$1.08, Last close: S$1.04
Analyst: Paul Chew
– Revenue and EBITDA were in line with expectations at 101%/102% of our FY22e estimates. 4Q22 revenue growth of 23% was supported by mobile and broadband acquisition. EBITDA halved due to DARE+ transformation and one-off expenses. FY22 dividends are down 22% YoY to 5 cents.
– Guidance is for another weak year of EBITDA margins for FY23. Service EBITDA margins to be maintained at 20% with revenue growth of 8-10%.
– Around 35% or S$75mn of the planned S$310mn DARE+ has been spent. From the remaining S$235mn to be spent, we expect S$180mn to be used in FY23e. Bulk of the DARE+ transformation cost is in EPL content and IT software and services. We maintain FY23e revenue but lowered EBITDA by 4%. Our target price lowered to S$1.08 (prev. S$1.15), pegged at 6.5x FY22e EV/EBITDA, in line with other mobile peers. We downgrade our recommendation to NEUTRAL. We do not find the dividend yield attractive as investors weather another year of weak earnings.
Recommendation : ACCUMULATE (Upgraded); TP: US$117.00, Last Close: US$98.24
Analyst: Maximilian Koeswoyo
– Revenue was in line with expectations at 101% of our FY22 forecast; while earnings were a slight miss with normalized PATMI at 96%, excluding a pre-tax valuation loss of US$12.7bn from Rivian Automotive, due to higher-than-expected operating expenses.
– 4Q22 revenue grew 8.6% YoY, beating top-end company guidance with advertising continuing to buck the industry’s declining trend. AWS remains the fastest growing segment but growth is expected to decelerate to mid-teens in 1Q23.
– We upgrade to ACCUMULATE with a raised DCF target price of US$117.00 (prev. US$108.00) using a WACC of 6.4% and terminal growth rate of 5%. We expect near-term challenges for revenue growth as consumers are more selective in their discretionary spending and AWS customers opt for lower-cost products. However, we expect growth to reaccelerate in FY24e, particularly for AWS as Amazon increases its client base and customers scale up their computing demand as macro improves.
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