DAILY MORNING NOTE | 16 November 2022

Singapore stocks gained on Tuesday (Nov 15), with the Straits Times Index (STI) climbing 0.4 per cent or 14.48 points to 3,275.28 as market sentiment appeared to improve after talks between US President Joe Biden and China’s President Xi Jinping at the G20 summit on Monday. Across the broader market, gainers beat losers 335 to 261 after 1.89 billion securities worth S$1.45 billion changed hands. On the STI, DFI Retail Group was the strongest performer, gaining 2 per cent or US$0.05 to close at US$2.50. Sembcorp Industries was at the bottom of the table, shedding 3 per cent or S$0.09 to close at S$2.93. The trio of banks were in the black after DBS and OCBC both raised fixed home loan rates to up to 4.3 per cent. DBS gained 0.9 per cent, or S$0.32 to close at S$35.18, while OCBC rose 1.2 per cent, or S$0.15 to close at S$12.47 and UOB gained 0.2 per cent or S$0.05 to close at S$30.

Wall Street closed higher on Tuesday as investors were upbeat about further signs US inflation is slowing and amid good earnings reports, but retreated from the day’s high after reports of a missile strike in Poland. Nato and the Pentagon said they were looking into unconfirmed reports that two Russian missiles had landed inside Nato-member Poland. The news sent stocks lower but major indices recovered ground by the closing bell. The Dow Jones Industrial Average edged up 0.2 per cent to finish the session at 33,592.92. The broad-based S&P 500 gained 0.9 per cent to 3,991.73, while the tech-rich Nasdaq Composite Index increased 1.5 per cent to close at 11,358.41. Equities moved decidedly higher early in the day, rebounding from Monday’s losses after Walmart’s quarterly earnings beat expectations, as did Home Depot’s, while new data showed further signs inflation is slowing. The US producer price index slowed in October, and the annual PPI eased to 8.0 per cent, adding to rising hopes the Federal Reserve can slow the aggressive pace of interest rate hikes after six increases this year, including four super-sized moves.

Top gainers & losers



Chocolate maker Delfi on Tuesday (Nov 15) posted earnings before interest, taxes, depreciation and amortisation (Ebitda) of US$13.7 million for the third quarter ended Sep 30, more than doubling from its Ebitda of US$6.4 million in the corresponding year-ago period. Revenue for the quarter rose 28.7 per cent to US$112 million, up from US$87 million the year before, on the back of improvements in Indonesia and regional markets. Revenue from Indonesia grew 31.9 per cent to US$70 million for the quarter, while revenue from regional markets climbed 23.9 per cent to US$42 million. Gross profit margin rose 270 basis points to 29.7 per cent in the third quarter, from 27 per cent a year ago. This was due to higher sales growth of the company’s premium format category, combined with “disciplined cost control, improved operational efficiencies, and tighter control of costs”, the group said in a bourse filing. For the first nine months of FY2022, Ebitda was 47.1 per cent higher at US$48.3 million, while revenue increased 20.4 per cent to US$358.3 million. Gross profit margin rose by 110 basis points to 29.5 per cent. With the release of these results, the company has “surpassed” the performance for the same pre-Covid periods in 2019 when revenue was US$105 million and US$332 million for the third quarter and nine months, respectively, Delfi said. However, it noted that it is mindful of challenges in the macro environment, including heightened geopolitical tensions, currency volatility, supply chain bottlenecks and inflationary pressures in Indonesia and elsewhere, which are “expected to add to the rising cost of materials and prices later in 2022”. The group added that it will continue to closely manage its operating costs and collections. Shares of Delfi closed flat at S$0.755 on Tuesday, before the quarterly update.

Singapore Technologies Engineering (ST Engineering) subsidiary TransCore has been awarded turnkey tolling system contracts in the US worth a total of S$1.47 billion. The technology, defence and engineering group said in an announcement on Tuesday (Nov 15) that the contracts with the New Jersey Turnpike Authority (NJTA) and the South Jersey Transportation Authority (SJTA) will modernise the tolling infrastructure in New Jersey. The NJTA project includes the design, installation, operation and maintenance of tolling systems on the 241 km Garden State Parkway and 209 km New Jersey Turnpike – two of the busiest toll roads in the US – for 10 years. The SJTA project covers the design, installation, operation and maintenance of an All-Electronic Tolling (AET) system on the 72 km Atlantic City Expressway for 12 years. ST Engineering said TransCore will replace the existing tolling infrastructure with its own flagship toll collection system that integrates automatic vehicle identification and vehicle classification. ST Engineering said the contracts are not expected to have a material impact on its net tangible assets per share and earnings per share for the current financial year ending December. Shares of ST Engineering closed 1.2 per cent or S$0.04 lower at S$3.42 on Tuesday, before the announcement.

Flag carrier Singapore Airlines (SIA) carried 2.3 million passengers on a group level in October, up 6.2 per cent from the previous month, it said in its operating results filed to the bourse on Tuesday (Nov 15). That was a 4.9 per cent increase in passenger capacity from September for SIA and Scoot, the two airlines in the group. Year on year, group capacity was up 109.7 per cent, reaching 71 per cent of pre-Covid-19 levels during October. SIA group noted that it continued to see “strong travel demand” in October, boosted by the spring school breaks in Australia and New Zealand, as well as the relaxation of travel restrictions in Hong Kong, Japan and Taiwan. The group’s passenger load factor came in at 86.4 per cent in October, marginally lower by 0.6 percentage point on a month-on-month basis, and 66.5 percentage points higher on a year-on-year basis. Cargo operations registered a load factor of 52.6 per cent, down 34.6 percentage points on year, with loads declining 19.8 per cent on year. Meanwhile, capacity expanded by 32.9 per cent as increased passenger services resulted in higher bellyhold capacity. At the end of October, SIA group’s passenger network covered 109 destinations. SIA has resumed flights to Chengdu and Xiamen, bringing the destinations it serves to 76. Meanwhile, Scoot has reintroduced flights to several points in Indonesia (Lombok, Makassar, Pekanbaru and Yogyakarta) and mainland China (Hangzhou, Wuhan and Zhengzhou). It now serves 55 destinations. Shares of SIA closed at S$5.47 on Tuesday, up S$0.02 or 0.4 per cent, before the announcement.


Amazon.com is starting a health referral service that seeks to link patients to virtual visits with providers who treat conditions like acne, hair loss and allergies. The initiative, called Amazon Clinic, is the Seattle company’s latest effort to break into health care. It already operates an online pharmacy, and is in the process of buying 1Life Healthcare, which manages clinics under the One Medical brand, for US$3.49 billion. In a blog post announcing the service on Tuesday (Nov 15), Amazon called the new clinic a “virtual health storefront,” connecting patients to “award-winning telehealth providers.” The post didn’t name those partners. The offering will be initially available in 32 US states and doesn’t yet accept insurance, Amazon said. Patients select their condition, choose a provider from a list, and complete an intake questionnaire. From there, they connect directly to the provider through a “message-based portal.” The marketplace model is a new direction for Amazon in health care. The company tried through Amazon Care to offer medical services itself, hiring and directing nurses and other medical professionals, but that initiative is being wound down.

Comment: The layoffs come as no surprise as Amazon has been struggling with its efficiency since the pandemic situation started to improve. 9M22 operating income was 56% lower than that of FY21. Coupled with a lackluster guidance going into the holiday season, it was only a matter of time that Amazon followed the steps of its big tech peers in their efforts to improve margins.

Maximilian Koeswoyo

Research Analyst


Walmart on Tuesday (Nov 15) forecast a smaller fall in annual profit as demand for groceries holds up despite higher prices, while discounts on clothing and electronics attract more inflation-hit shoppers to the top US retailer’s stores. The company also raised its full-year net sales expectations and announced a new US$20 billion share buyback plan, pushing its shares up 5 per cent in premarket trading. Sales of food and other essentials that fill much of Walmart’s shelf space have proved resilient, even as shoppers cut back on discretionary spending amid decades-high inflation. The company’s heavy discounting and focus on keeping prices lower than rivals have also helped it take market share from smaller players. However, those moves have hit the company’s gross profit margins, which tumbled 89 basis points in the third quarter ended Oct 31. The company said it expects fiscal 2023 adjusted earnings per share to fall 6 per cent to 7 per cent, compared to its previous forecast of a 9 per cent to 11 per cent decline. Walmart said it expects fiscal 2023 net sales to increase 5.5 per cent, compared to its previous forecast of a 4.5 per cent increase. Total third-quarter revenue rose 8.7 per cent to US$152.81 billion, beating analysts’ estimates of US$147.75 billion, according to Refinitiv IBES data. Walmart enters the holiday quarter with inventories valued at nearly US$65 billion, up from about US$60 billion three months ago. However, Walmart forecast holiday quarter US same-store sales, excluding fuel, to increase about 3 per cent, below estimates of a 3.4 per cent increase. Fourth-quarter adjusted earnings per share are expected to decline 3 per cent to 5 per cent, compared to analysts’ estimates of a 4.5 per cent fall. FedEx and Amazon have warned of a slump in holiday season demand in recent weeks.

Warren Buffett’s Berkshire Hathaway took a stake of about US$5 billion in Taiwan Semiconductor Manufacturing (TSMC), disclosing its holding in the world’s leading chipmaker as part of its portfolio changes in the last quarter. The Omaha-based conglomerate acquired about 60 million American depository receipts (ADRs) in TSMC in the three months that ended in September, it said in a filing. The Taiwanese company produces semiconductors for clients like Nvidia and Qualcomm and is the exclusive supplier of Apple’s custom Silicon chips. Apple remains the most valuable single holding in Berkshire’s portfolio. Assuming Buffett bought TSMC’s ADRs at the average price for the third quarter, the stake would have cost him US$5.1 billion. They currently trade at US$72.80. The 92-year-old Buffett long shied away from the tech industry, making the case that he didn’t want to invest in businesses that he didn’t fully understand. That stance changed in recent years, however, and he has dedicated an increasing proportion of his company’s investments to the tech sector. Chipmaking is one segment that promises sustained growth over the coming years as it is essential to the expansion of nascent industries like self-driving and electric cars (EVs), artificial intelligence (AI) and connected home applications. Expansion of cloud services like Amazon.com’s AWS also promises to bring in more orders for silicon that goes into vast data centres. TSMC, which has taken over from Intel as the firm advancing the cutting edge of chipmaking, has also emerged as a strategically vital player at a time when the US and China have clashed over leadership in the global technology industry. Taiwan’s most valuable company has the manufacturing prowess to make the world’s most advanced chips, instrumental to advancing every nation’s future commercial industries like EVs and AI but also feeding their military and cyber defence ambitions. The US has imposed elevated sanctions on high-end chips produced for Chinese customers specifically to forestall them making their way into the hands of the Chinese military. TSMC shares at home in Taiwan have dropped 28 per cent this year through Monday’s (Nov 14) close, as demand for chips has slowed with the economic downturn and investors fretting about oversupply. The company said in October it pulled back on capital spending to about US$36 billion this year, which would still be a record high, down from at least US$40 billion planned previously.

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


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