DAILY MORNING NOTE | 15 February 2024

Trade of the Day

AEM Holdings Ltd (SGX: AWX)

Analyst: Zane Aw

(Current Price: S$2.70) – TECHNICAL BUY
Buy price: S$2.70 Stop loss: S$2.56 (-5.19%)
Take profit 1: S$2.95 (+9.26%) Take profit 2: S$3.15 (+16.67%)

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Trades Initiated in the past week

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It was no bed of roses for Singapore shares on Wednesday (Feb 14), which took their cue from Wall Street’s overnight losses after US inflation turned out stickier than expected. Stocks finished slightly lower at 3,139.07 – down 2.8 points or 0.1 per cent – as the hotter-than-expected US consumer price index (CPI) for January underscored persistent inflationary pressures, dashing hopes of the Federal Reserve cutting rates sooner. Across the broader market in Singapore, turnover on Wednesday stood at 1.4 billion securities worth S$1.23 billion. Decliners outnumbered advancers 282 to 270. Losses were led by Jardine Matheson Holdings and Jardine Cycle & Carriage.

Wall Street stocks resumed their upward climb on Wednesday (Feb 14), shaking off worries about inflation that had punished the market the prior session. The Dow Jones Industrial Average finished up 0.4 per cent at 38,424.27. The broad-based S&P 500 gained 1.0 per cent to 5,000.62, while the tech-rich Nasdaq Composite Index jumped 1.3 per cent to 15,859.15. Among individual companies, Lyft vaulted nearly 35 per cent higher after it projected a 2024 profit margin expansion of around 50 basis points.

Top gainers & losers

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Events Of The Week

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SG

Far East Hospitality Trust’s (FEHT) distribution per stapled security (DPS) for the second half ended December 2023 rose 25.4 per cent to S$0.0217, from S$0.0173 in H2 FY2022. Gross revenue gained 28.6 per cent year on year to S$54.8 million. The stapled hospitality group registered higher revenue contributions across all business segments – particularly in the hotel segment, where contributions grew 36.5 per cent to S$41 million. Based on the stapled hospitality group’s H2 and full-year results released on Wednesday (Feb 14), revenue per available room (RevPAR) for hotels rose 19.9 per cent to S$140.

Keppel has been appointed to design, build and operate a solar photovoltaic (PV) system on the rooftops of Changi Airport’s terminals, terminal auxiliary structures, airfield and cargo buildings for 25 years, the asset manager announced on Wednesday (Feb 14). In a joint release with Changi Airport Group (CAG), the group announced that the system will have a combined generation capacity of 43 megawatt-peak (MWp), of which 38 MWp will be installed on rooftops. This makes it the largest single-site rooftop solar PV system in Singapore. The remaining 5 MWp of solar-generation capacity will come from a solar PV system installed at a 40,000 sq m turf area within Changi Airport’s airfield, outside of aircraft operational areas. The system is slated to be completed in early 2025. The rooftop and airfield solar PV systems are expected to generate enough solar energy to power more than 10,000 four-room Housing Board flats annually.

DBS China has received a licence to underwrite debt financing instruments for non-financial enterprises, including foreign issuers, in China’s interbank bond market. DBS is the first South-east Asia headquartered bank to secure such a licence, which was awarded by China’s National Association of Financial Market Institutional Investors. It will enable non-financial enterprises outside of China to tap the world’s second-largest bond market, by leveraging DBS’ “track record in helping foreign governments and agencies, supranational organisations, and financial institutions”


US

Nvidia overtook Google-parent Alphabet’s stock market capitalisation to become the third biggest US company on Wednesday (Feb 14), days before the poster child of AI boom is due to report fourth-quarter results. Strong demand for the Silicon Valley company’s chips used in artificial intelligence computing has powered the stock 231 per cent in the past 12 months to record highs, taking its market value to US$1.812 trillion. With a 50 per cent surge lifting Nvidia to the top spot among the S&P 500 components stock performance this year, the company has joined the league of Magnificent Seven stocks, surpassing retail giant Amazon.com earlier this month.

Uber Technologies said on Wednesday (Feb 14) it will buy back up to US$7 billion worth of company shares after a strong recovery in ride-share and healthy demand at its food delivery business. The company’s shares rose more than 5 per cent to US$72.50 in trading before the bell. This is their first-ever share repurchase programme, a vote of confidence in the company’s strong financial momentum. The ride-hailing firm posted its first annual net profit last year since the company went public in 2019. Uber had a free cash flow of US$3.4 billion in 2023, up from US$390 million a year earlier.

Microsoft said in its report it had tracked hacking groups affiliated with Russian military intelligence, Iran’s Revolutionary Guard, and the Chinese and North Korean governments as they tried to perfect their hacking campaigns using large language models. Those computer programmes, often called artificial intelligence, draw on massive amounts of text to generate human-sounding responses. The company announced the find as it rolled out a blanket ban on state-backed hacking groups using its AI products.

Technology company Nokia on Wednesday (Feb 14) unveiled an AI-powered tool that generates messages for industrial workers, including warnings about faulty machinery based on real-time data and recommended ways to boost factory output. The tool, “MX Workmate”, will expand on Nokia’s existing communications technology used by industrial clients by harnessing generative artificial intelligence (AI) large language models (LLMs) to write human-like text, the company said. These could include early warnings about machine failure along with recommended actions for repairs, solutions to boost production quality and rates, or dealing with accidents at factories.

Morgan Stanley is planning to eliminate several hundred jobs, the first such move under chief executive officer Ted Pick. The cuts will affect less than 1 per cent of employees in the wealth-management business, which has about 40,000 workers and is the firm’s largest unit, according to a source with knowledge of the matter.

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


RESEARCH REPORTS

Far East Hospitality Trust – Mega events to drive RevPAR recovery

Recommendation: BUY (Maintained), Last Done: S$0.64
Target price: TP: S$ 0.79, Analyst: Liu Miaomiao

– Gross revenue for FY23 rose by 27.8% YoY to S$106.8mn on the back of a rebound of hotel revenue of 36%. It was within our expectations. ADR increased by 36.1% YoY to S$170 thanks to rising international visitor arrivals to 71% of pre-COVID level. Occupancy grew 6.3 pp YoY to 80.1%, leading to a 47.8% rise in RevPAR to S$136.

– DPU exceeded our expectation by 7%, surging to 4.09 cents (+25.1% YoY), supported by a higher NPI (+27.7% YoY) and S$8mn distribution of divestment gain of Central Square.

– We reiterate our BUY recommendation with an unchanged DDM-TP of S$0.79 and FY24e-25e DPU forecasts of S$4.35 to S$4.45 cents. As Chinese travelers return supported by 30-day visa-free policy, we expect revenue to rise, backed by the improving occupancy rate. ADR is expected to be maintained due to the line-up of MICE and mega concerts in FY24. FEHT is currently trading at FY24e dividend yields of 6.8% and 0.7x P/NAV.

Amazon.com Inc. – Improving efficiency through regionalization

Recommendation: BUY (Maintained); TP: US$215.00

Analyst: Helena Wang

– 4Q23 revenue was in line with our expectation, while PATMI exceeded. The PATMI outperformance was due to cost efficiencies and higher operating leverage. 4Q23 Adj. PATMI grew ~3x YoY. FY23 revenue/PATMI was at 100%/111% of our FY23e forecasts.

– Operating income for 4Q23 grew ~5x YoY due to the benefits of network regionalisation in the US, strong advertising growth. Operating margin grew to 7.79%, an increase of 6% YoY.

– Due to higher operating leverage, we raise our FY24e PATMI by 58%. Our revenue forecast remains unchanged. We roll over an additional year of valuations and maintain our BUY recommendation with a raised DCF target price of US$215 (prev. US$190) to reflect our assumptions. Our WACC/growth rate of 6.4%/5% remains unchanged.

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