DAILY MORNING NOTE | 15 November 2023

Singapore stocks closed lower on Tuesday (Nov 14) despite mostly positive trading in regional markets, as investors awaited the release of key inflation data in the US. Singapore Airlines among the top decliners on the index, slipping 1.6 per cent or S$0.10 to S$6.11. The local banks also ended in the red on Tuesday. OCBC fell 0.2 per cent or S$0.02 to S$12.95, and UOB slipped 0.3 per cent or S$0.07 to S$27.33. DBS, which was trading on an ex-dividend basis, fell 1.7 per cent or S$0.57 to close at S$32.60. Meanwhile, Genting Singapore was the day’s top index performer following stronger-than-expected third-quarter results released last Friday. The counter surged 10.6 per cent or S$0.09 to close at S$0.94, with 131.2 million shares worth S$120.9 million traded.

US stocks closed up sharply on Tuesday on the news that US inflation cooled by more than expected last month, fueling hopes of an end to interest rate hikes. The US Federal Reserve voted last month to hold rates steady at a 22-year high for the second consecutive meeting as policymakers look to bring down inflation while avoiding a damaging recession. Consumer inflation in the United States increased by 3.2 per cent in the 12 months to October, down from 3.7 per cent a month earlier, according to the Labor Department. So-called “core inflation” – stripping out volatile food and energy prices – also slowed to an annual rate of 4.0 per cent. The below-target core and headline inflation figures fueled hopes that the Fed is done hiking interest rates, which is often good news for stock markets. The Dow Jones Industrial Average jumped 1.4 per cent to finish the day at 34,827.70, while the broad-based S&P 500 Index jumped 1.9 per cent to 4,495.70. And the tech-rich Nasdaq Composite Index surged 2.4 per cent to 14,094.38.

SG

Chocolate confectionery company Delfi saw its earnings before interest, taxes, depreciation and amortisation (Ebitda) decline 6.3% to US$12.9 million in the third quarter ended Sep 30, 2023, from US$13.7 million a year earlier. This was despite the group posting a 12.9 per cent increase in third quarter revenue to US$126.4 million, from US$112 million the year before. In its business update on Tuesday (Nov 14), the company attributed the growth in revenue to higher sales in both Indonesia and its regional markets, which comprise Malaysia, the Philippines and Singapore. However, the group’s Ebitda was impacted by higher selling and distribution costs. It said that this is in line with the group’s business growth and strategic decisions to increase investments in brand building initiatives. It further noted that the last few months have seen a significant increase in global uncertainties amid geopolitical tensions and increasing macroeconomic headwinds.

Indonesian coal producer Geo Energy Resources posted a 68 per cent decline in net profit to US$11.5 million for the third quarter ended Sep 30, 2023, from US$35.7 million a year earlier. Revenue over the same period fell 33 per cent to US$111 million, from US$164.7 million a year ago. For Q3, the company declared an interim cash dividend of S$0.004 per ordinary share, as compared to the dividend of S$0.01 per ordinary share that it declared over the same period a year earlier. The interim dividend will be paid on Nov 29, after the ex-dividend date of Nov 21, 5 pm. Earnings per share stood at S$0.0113 for the period, from S$0.0359 a year earlier. In its earnings release on Tuesday (Nov 14), Geo Energy attributed the lower revenue to lower sales volume and average selling price, noting that the average Indonesian Coal Index Price for 4,200 GAR (gross as received) coal fell to US$52.07 per tonne in Q3, from US$82.20 per tonne a year earlier. It added that the group delivered coal sales of 2.2 million tonnes in Q3, from the 2.4 million tonnes that it delivered in the same period a year ago.

Land transport giant ComfortDelGro posted a 54.5 per cent rise in net profit to S$49.9 million for the third quarter ended Sep 30, 2023, from S$32.3 million a year earlier. The company noted that its profit after tax and minority interests (Patmi) margin for the quarter rose to 5 per cent, from 3.4 per cent a year earlier. Revenue over the same period rose 3.8 per cent to S$996.6 million, from S$960.3 million a year ago. In a business update on Tuesday (Nov 14), the company noted that its public transport business improved as renewals and indexation in the UK continued to improve margins. Revenue for its public transport business in Q3 grew 3.4 per cent year on year to S$758.5 million, while operating profit gained 23.8 per cent to S$33.8 million. As for its taxi and private hire business, the company noted that demand remains high, although competition is increasing. It added that it has introduced a platform fee to its Zig app since July this year, and that its taxi fleet size holds firm, with a slight increase in market share. Revenue for its taxi and private hire business in Q3 grew 3.3 per cent to S$147.6 million, as operating profit rose 43.5 per cent to S$28.7 million.

Amara Holdings on Tuesday (Nov 14) received a voluntary cash offer at S$0.60 per share from a consortium linked to Albert Teo, the hotel group’s chief executive, other members of his family and private equity investor Dymon Asia. The offer price is final and represents a premium of 53.8 per cent over Amara’s share price of S$0.39 on Jun 15, before the company announced that its key shareholders were in talks over a possible transaction. Amara most recently transacted at S$0.46 before a trading halt was called on Nov 10. The S$0.60 offer price also represents a 70.5 per cent premium over Amara’s volume weighted average price for the one month up to Jun 15, and a 75.4 per cent premium over the three-month period. The offeror, a special-purpose vehicle called Amethyst Assets, intends to privatise Amara, it said in a Tuesday bourse filing, citing a challenging growth environment and low trading liquidity. Amethyst is 36.2 per cent-owned by First Security Pte Ltd (FSPL), a company in turn owned by Albert Teo and his siblings Susan Teo and Teo Kwee Chuan – who are Amara’s executive director and property division director respectively. Concordia United, an investment vehicle under Dymon Asia Private Equity, holds another 30.3 per cent stake in Amethyst.

US

Nvidia shares are extending gains for a 10th consecutive session, and are on pace for their longest streak of advances since a record-setting dash in December 2016, as the world’s most valuable chipmaker announced updates to its artificial intelligence processors. The Santa Clara, California-based company has climbed about 22 per cent during the course of this latest rally, adding about US$220 billion in market value, according to data compiled by Bloomberg. That’s as rivals are scrambling to come up with alternatives to challenge its AI dominance. The stock has rallied about 240 per cent this year, making it the best performing component on both the Nasdaq 100 and S&P 500 indexes as the AI-driven frenzy fuelled rallies. The latest surge comes as technology stocks rebound amid hopes that Federal Reserve interest rates have peaked. Nvidia, which had been under pressure last month as new US rules banned the sale of its cutting-edge AI chips to China, is scheduled to report earnings on Nov 21.

Amazon.com is adding package tracking and return services for subscription members who use Buy With Prime, ahead of the holiday shopping season when it will face competition from new marketplaces including Shein and Tik Tok Shop. Buy With Prime, which launched in 2022, gives retailers who are not Amazon merchants fulfillment and delivery through its logistics network. Its newest features aim to pull in fee revenue from shops outside of Amazon.com during the peak holiday season. US shoppers are expected to spend between US$273.7 billion and US$278.8 billion online this holiday season, an increase between 7 per cent and 9 per cent, according to the National Retail Federation. Peter Larsen, Amazon vice-president of Buy with Prime, said the company is seeing some non-Amazon merchants who use Buy With Prime sign up to be third-party sellers after seeing more sales. Along with speedy deliveries, Prime shoppers can now return items purchased through Buy With Prime outside of Amazon.com without shipping labels and boxes. The perk was previously only available to orders made through the e-commerce platform. Amazon also announced that Prime customers who buy from Buy With Prime merchants can now see their order history on their apps and have 24-hour access to customer service representatives.

New York-listed Sea fell back into the red, reporting a loss of US$143.9 million for the third quarter of 2023. The loss missed analysts’ consensus of a profit of US$102 million, and came as the company shifts its focus to growth for its e-commerce segment. Sea said maximising long-term profitability for the e-commerce business requires scale and strong market leadership. “To achieve this long-term objective, we look at three key operational factors: growth, current profitability, and market share gain,” said Forrest Li, Sea chairman and chief executive. This shift to growth is predicated on recent developments, according to Li, with the emergence of new e-commerce competition. “Our move to self-sufficiency and profitability in the past quarters has significantly improved both our cash reserves and operational efficiency and we see a very good opportunity to build our e-commerce content ecosystem efficiently, especially in live streaming,” said Li. There is a commitment to maintaining a strong cash position without relying on external funding, with Li noting that Sea’s cash position has increased over US$600 million year on year to over US$7.9 billion.This puts the company in a strong position to pursue growth, with a focus on maintaining a financial discipline and a strong balance sheet for the long term, said Li. Any investment will be done within its means and at its pace.

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

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