DAILY MORNING NOTE | 14 August 2024

Trade Initiated in Past Week

Singapore shares rallied with their regional peers on Tuesday (Aug 13), as Yangzijiang Shipbuilding led gains. The counter climbed 14.7 per cent or S$0.35 to S$2.73. The company had earlier posted a 77 per cent rise in H1 profit to 3.1 billion yuan (S$553.7 million) as its revenue grew 15 per cent to 13 billion yuan.

US stocks closed higher on Tuesday (Aug 13) as traders responded positively to cooler-than-expected producer inflation data, bolstering expectations of a Federal Reserve interest rate cut. The producer price index (PPI) rose by 0.1 per cent in July, down slightly from a month earlier. All three major indices on Wall Street finished higher on Wednesday, led by the tech-rich Nasdaq Composite index, which closed up 2.4 per cent at 17,187.61. The Dow Jones Industrial Average finished 1 per cent higher at 39,765.64, and the broad-based S&P 500 rose 1.7 per cent to 5,434.43.

Singapore Technical Highlights

Top gainers & losers

Events Of The Week

SG

DBS on Tuesday (Aug 13) announced the pilot launch of its blockchain-powered treasury tokens, in a tie-up with digital payment and financial services provider Ant International. The treasury tokens, enabled by DBS’ permissioned blockchain, is integrated with the bank’s core payments engine and uses smart contracts and tokenisation to improve banking efficiencies. Ant International, through the collaboration, will be able to use the bank’s permissioned blockchain for its entities across different markets.

Singapore has lowered its full-year exports outlook to a range of 4 to 5 per cent, from 4 to 6 per cent. Non-oil domestic exports (NODX) fell 6.4 per cent year on year (yoy) in the second quarter, following a 3.4 per cent decrease in Q1. This was partly due to a high base in the year-ago period, and also driven by a decline in non-electronic NODX during the quarter, primarily due to a fall in pharmaceuticals exports.

Singapore has narrowed its official full-year growth forecast for 2024 to a range of 2 to 3 per cent, from 1 to 3 per cent previously. This comes as gross domestic product growth for the second quarter came in at 2.9 per cent, unchanged from July’s advance estimate and comparable to the previous quarter’s 3 per cent growth.

Gaming and e-commerce player Sea on Tuesday (Aug 13) posted a net profit of US$79.9 million for the three months ended Jun 30, down 75.9 per cent from US$331 million in the corresponding year-ago Q2 period. Revenue for the second quarter was US$3.8 billion, rising 23 per cent from US$3.1 billion in the corresponding year-ago period. Sea’s earnings per share for the period was US$0.14, declining 75.4 per cent from US$0.57 a year ago. Revenue for its e-commerce segment, which houses platform Shopee, was US$2.8 billion, rising 33.7 per cent from S$2.1 billion year on year.

Solutions provider Nanofilm Technologies on Tuesday (Aug 13) announced that its net loss for the six months ended Jun 30 decreased by 51.1 per cent to S$3.7 million, from S$7.6 million in the corresponding year-ago period. This comes as its revenue for the period rose 13 per cent year on year to S$82.6 million, from S$73.2 million previously. This was attributed to higher contributions from its advanced materials, nanofabrication and Sydrogen business units.

Property and hospitality company UOL Group on Tuesday (Aug 13) reported a net profit of S$130.4 million in the first half of the year, a 3 per cent drop from S$135 million reported in the corresponding period last year. Revenue for H1 fell 7 per cent to S$1.27 billion, from S$1.37 billion in H1 2023, as UOL recorded lower contributions from its property development business. Still, the group is pressing ahead with a strong pipeline of launches, kicking off with the freehold Meyer Blue condominium, which is targeting to launch its private preview next month.

US

Agribusiness Wilmar International Tuesday (Aug 13) reported a net profit of US$579.6 million for the first half ended Jun 30, up 5.2 per cent from US$550.9 million in the year-ago period. This was attributed to better performance from the feed and industrial products, as well as food products segments. The gains were partially offset by lower contributions from joint ventures and associates, and sugar milling operations. Excluding losses from non-operating items, net profit would have been US$606.3 million, up 5 per cent year on year from US$577.2 million. The group declared an interim dividend of S$0.06 per share, which it maintained from last year. The dividend will be paid on Aug 29.

Home Depot forecast a decline in annual profit and a bigger drop in its annual comparable sales on Tuesday (Aug 13), as tepid discretionary spending dashed hopes of a recovery in demand for home improvement projects. Shares of the Dow component fell 4 per cent in premarket trading after the company also reported a bigger drop in comparable sales than expected for the second quarter. During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend.

Paramount Global will begin laying off 15 per cent of its workforce in the United States starting Tuesday (Aug 13) as part of its planned job cuts, the media giant said in an internal memo. Paramount, which owns networks like CBS, MTV and Comedy Central, aims to reduce annual costs by US$500 million and return to profitable growth ahead of its merger with David Ellison’s Skydance Media.

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

RESEARCH REPORTS

Magnificent-7 Monthly: July 24 – ROI concerns on AI Spending

Analyst: Phillip Research Team

• Mag-7 declined -2.3% in July24 due to concerns over ROI on AI investments and some pre-earnings profit-taking amidst a broader Tech sell-off. The S&P 500 remained resilient (+1.1%), while the Nasdaq 100 also declined -1.6%.
• TSLA (+17.5%) was the biggest gainer as investor optimism over FSD approval in China , robotaxi, and 2Q deliveries beat expectations. Post-earnings price moves were not recorded for AAPL, AMZN, META as they were in Aug24.
• Mag-7 mostly beat revenue expectations for CY2Q24 results, although growth (+11% YoY) continues to moderate slightly. CY2Q24 earnings jumped 26% YoY (CY1Q24: 69%). Excessive AI-related spending (and lack of ROI) was the main concern for Mag-7 this month, especially with commentary from CEOs stating the importance of overspending vs underspending. Digital advertising companies performed the best fundamentally, thanks to a recovering digital ad industry, and significant operating leverage. Expectations of a significant iPhone refresh cycle were pushed back due to weakness in China. EV unit volumes and pricing remain suppressed due to increasing competition. We maintain OVERWEIGHT on the MAG-7.

Airbnb Inc – Slowing travel demand

Recommendation: NEUTRAL; TP S$120.00; Last close: S$; Analyst Ambrish Shah

• 2Q24 revenue was within expectations due to seasonality weakness, while earnings was a miss on increased marketing spend and higher income taxes. 1H24 revenue/PATMI was at 44%/29% of our FY24e estimates. We expect PATMI to be backloaded into 2H24e driven by summer travel demand around the Olympics.
• For 3Q24e, Airbnb expects revenue to rise 9% YoY to US$3.7bn. The company expects sequential moderation in the YoY growth rate of booking volumes due to slowing travel demand in the US and shortening booking windows globally.
• We maintain NEUTRAL recommendation but lower our DCF target price to US$120.00 (prev. US$150.00). We maintain a WACC of 7.0%, but lower our terminal growth rate to 3.5% (prev. 4%) due to slowing travel demand. We cut our FY24e revenue/PATMI by 1%/9% to account for moderating travel demand and higher expenses. We expect moderating travel demand as booking patterns normalise from its post-pandemic peak.

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