DAILY MORNING NOTE | 14 September 2023
Singapore shares edged up 0.1 per cent on Wednesday (Sep 13). The top performer was UOB which rose 1.2 per cent or S$0.33 to S$28.63 while the top loser was Yangzijiang Shipbuilding, shedding 1.7 per cent or S$0.03 to S$1.69. The other local banks also ended the day in the black. DBS rose 0.8 per cent or S$0.28 to S$33.54, while OCBC climbed 0.5 per cent or S$0.06 to S$12.58.
Wall Street stock indices moved in opposite directions on Wednesday. Consumer inflation accelerated to 3.7 per cent in August, up from 3.2 per cent in July, an increase fueled by higher petrol prices. The Dow Jones Industrial Average declined 0.2 per cent to 34,575.53. But the broad-based S&P 500 added 0.1 per cent at 4,467.44, while the tech-rich Nasdaq Composite Index climbed 0.3 per cent to 13,813.59.
Olam Group has confirmed that it has paid a bond to secure the release of its director in Nigeria. Olam Nigeria had informed the group that it had posted a bond for its senior vice president, Prakash Kanth, in relation to the fraud allegations made to secure his continued cooperation with any legitimate requests from relevant Nigerian authorities for information or assistance. According to the Daily Nigerian, the amount for the bond was $1 billion Nigerian dollars ($1.9 million).
The Singapore Exchange Group (SGX) has reported a total securities market turnover value of $23.6 billion for the month of August, 2.88% lower y-o-y, although the figure was up by 10% on a m-o-m basis. During the month, the securities daily average value was unchanged y-o-y at $1.1 billion but is up 5% m-o-m. Derivatives volume rose strongly in August as more international investors turned to SGX’s platform to manage risk amid China’s efforts to boost its economic recovery. Derivatives traded volume increased 16% in August on both a m-o-m and y-o-y basis to 23.7 million contracts, with broad-based gains across equities, foreign exchange (FX) and commodities. Derivatives daily average volume (DAV) climbed 7% m-o-m to 1 million contracts.
Cordlife Group has updated that a possible transaction announced earlier in relation to its shares is not on the table anymore. The mainboard-listed cord blood banking company, in a bourse filing on Wednesday (Sep 13), said it had been notified that the confidential discussions between Cradle Investments and the third party in relation to a possible transaction has ceased.
XMH Holdings Ltd provided a quarterly update on the financial results, future direction and other material development that may have a significant impact on the Group’s financial position. Revenue, cost of goods sold and gross profits for Q1FY2024 increased by about 44.6%, 27.0% and 105.0% respectively as compared with the corresponding quarter in FY2023. This was mainly due to significant increase in revenue from Distribution segment with better margin. The increase was attributable to continual demand for engines to build tugboats which was in turn due to the increase in demand for tugboat transportation. However, the Group remains cautious in terms of its outlook given the challenging environment. The Group will continue to focus on further improving its operational capabilities, strengthening its existing business and cost-tightening measures across its business segments. In the meantime, the Group has also been considering and evaluating its options to fulfil the market capitalisation criterion to exit the watch-list. On many accounts, market capitalization is very much dependent on the prevailing market forces so much so that even corporate actions, if taken, do not guarantee success in achieving this. As such, the Group will adopt a holistic approach and will take into account all relevant factors and market conditions before making a decision for the benefit of shareholders. In the meantime, what the Group can do is to continue to focus and strive for profitability which it has managed to achieve in the last three financial years.
Singapore’s sovereign wealth fund GIC is considering selling its stake in the Philippines’ Emperador, the world’s biggest brandy manufacturer and owner of scotch brands including Jura and The Dalmore, according to people with knowledge of the matter. The state-owned firm has had talks with financial advisers about the possibility of an eventual divestment, said the people, asking not to be identified as the process is private. GIC hasn’t decided whether to pursue a sale and a deal isn’t imminent, some of the people said. GIC owns about 12 per cent of Manila-based Emperador via its private equity arm Arran Investment, the people said. Based on the brandy maker’s current market value, the stake is worth S$950 million. GIC originally invested in Emperador via Arran in 2014, according to a stock exchange filing at the time.
All Singapore REITs (S-REITs) have made climate-related disclosures in their latest sustainability reports, with over half issuing such disclosures for the first time. However, S-REITs are falling short of their global peers in terms of setting metrics and targets for decarbonisation, say EY and the REIT Association of Singapore (REITAS). The findings, released on Sept 13, are part of the “Climate risk disclosures in real estate investment trusts (REITS)” study, which reviewed the coverage and quality of climate-related disclosures by the 40 S-REITs traded on the Singapore Exchange (SGX), based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Singapore Exchange Regulation (SGX RegCo) has mandated climate reporting for all issuers on a “comply-or-explain” basis, effective for financial years starting on or after Jan 1, 2022.
Inflation posted its biggest monthly increase this year in August as consumers faced higher prices on energy and a variety of other items. The consumer price index, which measures costs across a broad array of goods and services, rose a seasonally adjusted 0.6% for the month, and was up 3.7% from a year ago against estimates for 0.6% and 3.6%, the U.S. Department of Labor reported Wednesday. The two numbers were up 0.2% and 3.2% in July. However, excluding volatile food and energy, the core CPI increased 0.3% and 4.3%, respectively, against estimates for 0.2% and 4.3%. Energy prices fed much of gain, rising 5.6% on the month, an increase that included a 10.6% surge in gasoline. Food prices rose 0.2% while shelter costs, which make up about one-third of the CPI weighting, climbed 0.3%.
Arm, the chip design firm that supplies core technology to companies including Apple and Nvidia, priced its initial public offering at US$51 a share. Arm’s fully diluted market cap, which includes outstanding restricted stock units, is over US$54 billion at the US$51 offer price. The company said in a press release that it will start trading on Thursday under the symbol “ARM.” The U.K.-based company is listing at least 95.5 million American depository shares on the Nasdaq, and SoftBank, its current owner, will control about 90% of the company’s outstanding shares. The offering is at the top of Arm’s expected price range of US$47 to US$51. Arm would carry a price-to-earnings multiple of about 105, based on profit in the latest fiscal year.
Apple said on Wednesday its iPhone 12 model was certified by multiple international bodies as compliant with global radiation standards after a French watchdog ordered it to stop selling the handset on the grounds it breaches European exposure limits. The ANFR radiation watchdog told Apple on Tuesday to halt sales of iPhone 12s in France after tests which it said showed the phone’s Specific Absorption Rate (SAR) – a measure of the rate of radiofrequency energy absorbed by the body from a piece of equipment at 5.74 watts per kilogram was higher than the European standard of 4.0 watts per kilogram. Apple said it had provided ANFR with multiple Apple and independent third-party lab results proving its compliance with all applicable SAR regulations and standards in the world. It said it was contesting the results of AFNR’s review and would continue to engage with the agency to show it is compliant.
Netflix leadership does not see meaningful impact in the near-term from its advertising tier. Chief Financial Officer Spence Neumann said the streaming service saw a “muted” cancelation reaction after it cracked down on password sharing. An estimated 100 million people were not paying for a subscription and taking advantage of family and friend accounts. “Revenue is building,” Neumann said, and will continue to do so through 2024. Those “spinoff” subscribers, however, are trending more towards ad-free viewing, which isn’t ideal for building up an ad business” the executive said at a Bank of America conference. The executive also said games remain a relatively small percentage of the content budget, and won’t see a big impact on growth in the short-term. Finally, he doesn’t see sports being profitable.
Alibaba said on Wednesday (Sep 13) it would open its artificial intelligence (AI) model Tongyi Qianwen to the public, in a sign it has gained Chinese regulatory approval to mass-market the model. The Alibaba Cloud Intelligence Division said organisations including OPPO, Taobao, DingTalk and Zhejiang University have reached cooperation agreements to train their own large language models or develop language model applications based on Tongyi Qianwen, according to a post published on its WeChat account. The post also said that in the near future, an open source version of the large language model would become available for free commercial use “by the whole society”.
Tencent Holdings has secured the rights to develop and publish the mobile edition of Bandai Namco Holdings’ Blue Protocol, betting on one of this year’s most anticipated multiplayer games to rekindle international growth, according to people familiar with the matter. The world’s biggest games company has assembled a developer team for the project and holds the global distribution rights, the sources said, asking not to be identified discussing private plans. It’s not clear when Tencent will debut Blue Protocol’s mobile game, which could take a year or more for development. The PC edition of the game launched in Japan in June. Blue Protocol is the latest large-budget online role-playing game that’s free to play and relies on in-game purchases for monetisation. That’s proven a lucrative business model for established titles such as League of Legends, from Tencent-owned Riot Games. In its first week, the game attracted 600,000 players – including 200,000 simultaneous connections at its peak – marking the fastest launch for any Bandai Namco domestic PC online game.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
Analysts: Jonathan Woo, Maximilian Koeswoyo
– Offering 95,500,000 shares at US$47-US$51 per share for a total offer amount of US$5.2bn. Largest IPO valuation of ~US$55bn with 1,026,078,866 shares outstanding.
– ARM mainly generates revenue from licensing and royalty fees from its semiconductor architecture design. It does not sell or manufacture any semiconductors.
– Top end of IPO range will put ARM’s LTM P/S ratio at 20x, with a LTM P/E ratio of 105x. Peer valuation of Broadcom and Qualcomm are 31x and 10x LTM P/E, respectively.
**Update 14/9/23: ARM has priced its IPO at US$51 per share.
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