DAILY MORNING NOTE | 10 November 2023

Singapore shares ended higher on Thursday (Nov 9), along with most other markets in the region. It gained 0.2 per cent or 5.6 points to close at 3,135.32. Across the broader market, gainers outnumbered losers 313 to 237, after 1.3 billion securities worth S$945.6 million were traded. Regional markets ended mostly positive on Thursday, tracking Wall Street ahead of speeches by Federal Reserve officials. The Nikkei 225 was up 1.5 per cent along with ASX 200, which gained 0.3 per cent. The Kospi also edged up 0.2 per cent, while the Shanghai Stock Exchange ended flat. Hong Kong’s Hang Seng Index bucked the trend, slipping 0.3 per cent.

Wall Street stocks slumped on Thursday as Federal Reserve Chair Jerome Powell said the US central bank is prepared to hike interest rates further if needed to lower inflation. The Dow Jones Industrial Average dropped 0.7 per cent to 33,891.94, while the S&P 500 Index plunged 0.8 per cent to 4,347.35. The Nasdaq Composite Index tumbled 0.9 per cent to 13,521.45. The drop came after Powell told a conference in Washington that progress towards policymakers’ two per cent goal is “not assured.” This month, officials decided to hold interest rates at a 22-year high for a second straight meeting, fueling hopes that the Fed was done with rate hikes. But Powell said on Thursday: “If it becomes appropriate to tighten policy further, we will not hesitate to do so.”

Holiday Notice – As this Monday, 13 November is a public holiday, there will be no weekly market call webinar.

Top gainers & losers

Factsheets


EVENTS OF THE WEEK

Factsheets


SG

OCBC’s 3Q2023 results were slightly above expectations with net profit of S$1.81bn vs consensus estimate of S$1.79bn. It came from higher than expected net interest income of S$2.46bn (+17% YoY) on the back of net interest margin growth to 2.27% (+21bps YoY) and fee income of S$461mn (+2% YoY) lifted by higher wealth, credit card and trade-related fees. Total non-interest income grew 4% YoY to S$973mn, mainly from higher fee income and improved investment performance, which offset lower insurance income. However, total allowances were higher at S$184mn (+20% YoY) as SPs grew 182% YoY to S$220mn offset by a GP write-back of S$36mn (3Q22: GP of S$76mn). More details to follow after 9am analyst briefing.

Glenn Tham
Senior Research Analyst
glennthumjc@phillip.com.sg


Lippo Malls Indonesia Retail Trust (LMIRT) posted a 6 per cent drop in net property income (NPI) to S$30.6 million for its third quarter ended September, from S$32.8 million in the corresponding year-ago period. Gross revenue slipped 3.8 per cent to S$49.8 million for the quarter, from S$51.7 million a year ago. Rental revenue also dipped 6.2 per cent to S$28.1 million from S$29.9 million. In a bourse filing on Thursday (Nov 9), the manager of LMIRT attributed these declines to the rupiah’s 5.8 per cent year-on-year currency depreciation against the Singapore dollar, as well as lower rental contributions of S$0.7 million from Lippo Plaza Jogja, a shopping centre in Indonesia. No distribution will be paid to holders of its S$140 million and S$120 million perpetual securities, as the trust had announced earlier this year.

Beverage and publishing company Fraser and Neave (F&N) on Thursday (Nov 9) announced a 6.7 per cent rise in net profit to S$133.2 million for the financial year ended Sep 30, from S$124.9 million a year ago. Revenue grew 4.8 per cent on the year to S$2.1 billion, from S$2 billion. This was largely supported by its beverages segment, whose revenue increased 6.1 per cent to S$603.5 million, said the group in a bourse filing. It added that the increase in beverage revenue was mainly due to beer operations in Myanmar, which expanded capacity. This was despite unfavourable currency translations of S$16.8 million due to the weakening of the Myanmar kyat against the Singapore dollar. Earnings per share stood at 9.2 Singapore cents for the full year, up from 8.6 cents the year before.

Technology solutions provider CSE Global reported a revenue of S$185.4 million for the third quarter ended September, up 31.4 per cent from S$141.1 million in the corresponding year-ago period. In a business update on Thursday (Nov 9), the group attributed the better topline figures to strong growth in its electrification business segment in the Americas, as well as in the communications business segment, which saw contributions from recent acquisitions. Its topline was also supported by broad-based growth in flow revenues across all geographical regions, CSE Global added. CSE Global’s order intake – which refers to all orders received by the group during the specified period – for the quarter rose 82.9 per cent to S$301.6 million, up from S$210.6 million in the year-ago period.

Singtel on Thursday (Nov 9) posted an 82.6 per cent rise in net profit for the first half of 2023, supported by an exceptional gain from regional associate Telkomsel’s integration of IndiHome, a fixed broadband provider in Indonesia. Net profit for the six months ended Sep 30 stood at S$2.1 billion, compared with a net profit of S$1.2 billion in the same period last year. The results translate to an earnings per share (EPS) of S$0.1294, compared with an EPS of S$0.0709 in the year-ago period. Operating revenue, however, was down 3.2 per cent year on year to S$7 billion from S$7.3 billion. The group’s results were “adversely impacted” by the strength of the Singapore dollar against the Australian dollar and regional currencies, said Singtel in its results announcement.

Property company Centurion Corporation’s revenue for the third quarter of 2023 rose to S$51.1 million, 15 per cent higher than the same period last year. The company, which owns foreign worker dormitories and student-accommodation facilities in its portfolio, said that the increase came from higher occupancies in the dormitories in Singapore and Malaysia, as well as in its student hostels in the United Kingdom and Australia. Higher rental rates across its properties in these four markets also contributed to the revenue increase, said Centurion in a bourse filing on Thursday (Nov 9). Its revenue for the first nine months of its current financial year – the period ended on Sep 30 – rose 10 per cent to S$149 million, compared to the corresponding period the year before. Revenue for its workers’ accommodation properties rose 16 per cent to S$40.1 million in the third quarter.

Semiconductor equipment maker AEM Holdings posted a 96.9 per cent decline in net profit to S$3.5 million for the first nine months of 2023, from S$115.3 million in the corresponding year-ago period. Revenue fell by 48.2 per cent to S$387 million for 9M FY2023, from S$746.6 million for 9M FY2022. In a business update on Thursday (Nov 9), AEM attributed the drop in revenue to “overall sluggishness” in the semiconductor industry, with most customers pushing their capital expenditures related to testing to 2024 as a result of lower demand across the industry. The group pointed out that during the third quarter, semiconductor device makers continued to reduce their inventories due to a weak macroeconomic environment. This has been compounded by a slower recovery in demand from China, it added.

Entertainment company Unusual Limited’s net profit soared to S$14.1 million for the first half of its financial year ended Sep 30, from just S$1 million in the same period last year. Revenue also hit a record S$66.4 million, an increase of 954 per cent year on year over the same period, said the company in a bourse filing on Thursday (Nov 9). The increase was due to a higher number of live concerts the company produced, as well as robust demand for tickets and overwhelming attendance at various shows, it said. Earnings per share increased to 1.37 Singapore cents, compared to 0.1 cent a year ago.

US

Grab has hit its adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) breakeven forecast, posting US$29 million for the third quarter of 2023. The transport and food-delivery operator had at last quarter’s earnings call given guidance for adjusted Ebitda breakeven by Q3 2023. The positive adjusted Ebitda results also beat analysts’ consensus of US$9.5 million. Grab’s losses for the quarter narrowed to US$99 million, from US$342 million a year prior. This was driven by a reduction in net interest expenses, fair-value losses on investments and share-based compensation expenses. The Q3 losses included a US$70 million non-cash share-based compensation expense. Revenue rose to US$615 million, a 61 per cent increase from US$382 million in the same period a year ago. The company attributed this to growth across all business segments and optimisation of incentives. The positive Ebitda, meanwhile, was attributed to increased gross merchandise value (GMV) and revenue, lowered regional corporate costs, and improved adjusted Ebitda across all business segments. Loss per share stood at US$0.02 for the quarter, down from US$0.08 the previous year.

Sony’s operating profit fell 29 per cent in the July-September quarter, below estimates, as the company was hit by a weaker performance at its image sensor and financial divisions. Profit for the July-September quarter was 263 billion yen (S$2.36 billion). That compared with a 306 billion yen estimate from 10 analysts polled by LSEG. Sony has shifted from being the creator of iconic household electronics such as the Walkman to an entertainment behemoth straddling games, movies and music and a leading maker of image sensors. The conglomerate is targeting sales of 25 million PlayStation 5 consoles this financial year.

Semiconductor Manufacturing International Corp (SMIC) quarterly revenue fell for the third straight quarter, reflecting the impact of a global smartphone slump and Washington’s broadening campaign to curb China’s technology sector. The Shanghai company reported a 15-per cent fall in revenue to US$1.62 billion, versus an average projection for US$1.64 billion. Net income fell 80 per cent to US$94 million, compared with estimates for US$178.1 million. The numbers missed despite hopes that the surprise popularity of a new range of Huawei Technologies 5G smartphones would help offset lost sales.

The number of Americans filing new claims for unemployment benefits fell last week as the labour market continued to show few signs of a significant slowdown. Initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 217,000 for the week ended Nov 4 from an upwardly revised 220,000 in the prior week, the Labor Department said on Thursday (Nov 9). Economists polled by Reuters had forecast 218,000 claims for the latest week. Data last week showed the job market is cooling, with the pace of hiring slowing and unemployment ticking higher, although joblessness – at 3.9 per cent in October – remains historically low. A separate report showed that there were 1.5 job openings for every unemployed person in September, down from around 2-to-1 when the job market was the most tight last year.

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


RESEARCH REPORTS

StarHub Limited – Dare+ investments ending soon

Recommendation: ACCUMULATE (Maintained); TP S$1.21, Last close: S$1.09; Analyst Paul Chew

– 3Q23 results were within expectations. 9M23 revenue and EBITDA were 74%/73% of our FY23e estimates. No change in StarHub FY23 guidance.

– Revenue growth of 5% YoY in 3Q23 was led by cybersecurity and mobile. Cybersecurity revenue rose 45% YoY to S$115mn on strong order books and pipeline. Mobile revenue expanded 7% YoY to S$153mn from higher roaming revenues.

– We maintain our FY23e forecast and ACCUMULATE recommendation. Our target price of S$1.21, pegged at 6.5x FY23e EV/EBITDA, is unchanged. With the S$310mn Dare+ investments in operating expense and capital expenditure, we expect an improvement in earnings in FY24e. The revenue opportunities post Dare+ investments remain unclear. The cybersecurity operation continues to build up its franchise and is yet to be fully priced into StarHub valuations as it remains unprofitable.

FAANGM Monthly: Oct 23 – Positive earnings growth

Recommendation: OVERWEIGHT (Maintained); Analysts: Jonathan Woo, Zane Aw, Phillip Research Team


– FAANGM outperformed, gaining +1.6% in October after better-than-expected results from most of Big Tech. S&P 500 and Nasdaq were both down -2.2% and -2.1%, respectively, as a result of increasing volatility in the Middle East.

– NFLX (+7.7%) and MSFT (+7.1%) were the biggest gainers in Oct 23 after both companies beat consensus estimates for revenue and earnings, and issued better-than-expected forward guidance. GOOGL (-5.8%) was the biggest loser after issuing disappointing Cloud growth vs its peers.

– Earnings growth (+45% YoY) for FAANGM was the key highlight of the month as most companies started to see the full effects of their cost optimisation efforts take place. Valuations remain attractive, with 12M Forward P/E -1 Std Dev away from its 10-year average. Digital advertising continues to recover, while demand for tech hardware remain a drag. We maintain an OVERWEIGHT recommendation on FAANGM.

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