DAILY MORNING NOTE | 16 November 2023
Trade of the Day
Analyst: Zane Aw
(Current Price: S$3.14) – TECHNICAL BUY
Buy price: S$3.14 Stop loss: S$2.97 (-5.41%)
Take profit: S$3.45 (+9.87%)
Asian markets rose on Wednesday (Nov 15), after data released a day before showed inflation in the United States cooled further. The banking trio in Singapore bucked the upward trend though, as any pause in the Federal Reserve’s rate-hiking campaign means a cap on net interest margin for the lenders. DBS declined 0.6 per cent or S$0.18 to S$32.42, UOB was S$0.02 or 0.1 per cent lower at S$27.31, while OCBC fell 0.5 per cent or S$0.07 to S$12.88. Mapletree Pan Asia Commercial Trust emerge as the best-performing counter after surging 6.8 per cent to close at S$1.42. While Yangzijiang Shipbuilding came in at the bottom after the vessel maker slipped 1.4 per cent to S$1.46.
Wall Street stocks advanced on Wednesday, extending the prior session’s rally on benign economic data expected to keep the Federal Reserve from hiking interest rates further. Data on Wednesday showed retail sales fell 0.1 per cent in October from the prior month, while wholesale prices declined by 0.5 per cent last month from September. The Dow Jones Industrial Average finished up 0.5 per cent at 34,991.21. The broad-based S&P 500 advanced 0.2 per cent to 4,502.88, while the tech-rich Nasdaq Composite Index added 0.1 per cent at 14,103.84.
Singapore Airlines (SIA) Group on Wednesday (Nov 15) posted a 24.5 per cent year-on-year (yoy) increase in passenger traffic in October, amid robust passenger traffic across all its route regions. Its bourse filing indicated that revenue passenger-kilometre, which measures the number of passengers carried multiplied by the distance flown, rose to 12.1 billion during the month, from 9.7 billion the year before. The growth in passenger traffic outpaced the 23 per cent expansion in its capacity. As a result of this, the group’s passenger load factor (PLF) rose by one percentage point to 87.4 per cent. (Passenger load factor is expressed as a percentage of available seat-km.) However, October’s group PLF was lower than the 87.7 per cent clocked the month before. SIA’s PLF for the month came in at 87 per cent, and that for its budget arm Scoot, 88.9 per cent. Both airlines carried just under 3.1 million passengers in October, up 36.1 per cent from October 2022. This was also higher than the 2.9 million passengers they carried in September. The group’s cargo operations posted a load factor of 56.1 per cent, higher than the 52.6 per cent from a year ago.
Enterprise technology company Silverlake Axis on Wednesday (Nov 15) posted a 15 per cent fall in its earnings for the first quarter of FY2024, on the back of flat revenue and higher operating costs. The company’s net profit for the three months ended September stood at RM48.9 million (S$14.1 million) down from RM57.6 million a year earlier. On a per-share basis, its earnings fell to 1.93 sen, from 2.28 sen previously. Silverlake’s revenue for the quarter was flat, inching up 1 per cent to RM189.2 million, on the absence of a large software-licensing transaction from a client in Indonesia, recognised in the year-ago period.
Manufacturer Grand Venture Technology (GVT) has reported a net profit of $1.3 million for its 3QFY2023 ended Sept 30, a 61.6% slump compared to its net profit for the same period last year. Revenue for the period also fell 13.4% to $28.5 million, with a decrease in business activity in GVT’s back-end semiconductor and electronics segments year-to-date. As a result, gross profit decreased by 22.9% to $6.6 million while gross profit margin lost 2.9 percentage points, falling to 23.0% in 3QFY2023. The ongoing absorption of expanded capacities and capabilities also contributed to the decline in gross profit and margins. The company says that while the global semiconductor and electronics industry downturn looks to be bottoming out, it expects headwinds to continue for the rest of 2023.
Mermaid Maritime has posted record earnings of US$6.9 million ($9.3 million) for the 3QFY2023 ended June 30, more than doubling its earnings of US$3.1 million in the same period last year. Earnings per share also increased to 0.5 US cents for the period, up from 0.2 US cent sin 3QFY2022. For the same period, revenue increased y-o-y by US$19.4 million or 29.5% to US$85.2 million resulting from an increase in subsea inspection, repair, maintenance (IRM) and diving works, as well as transport, installation and decommissioning projects that began during the quarter. Consequently, the cost of services rendered also increased y-o-y by US$14.1 million or 24.5% to US$71.7 million. The company’s net cash flow from operations was US$8.1 million as a result of higher profits generated during the period. As at end-September, Mermaid Maritime’s cash and cash equivalents stood at $US12.4 million, with an order book exceeding US$697 million.
Microsoft on Wednesday (Nov 15) announced a duo of custom-designed computing chips, joining other big tech firms that – faced with the high cost of delivering artificial intelligence services – are bringing key technologies in-house. Microsoft said it does not plan to sell the chips but instead will use them to power its own subscription software offerings and as part of its Azure cloud computing service. At its Ignite developer conference in Seattle, Microsoft introduced a new chip, called Maia, to speed up AI computing tasks and provide a foundation for its US$30-a-month “Copilot” service for business software users, as well as for developers who want to make custom AI services.
Goodyear Tire & Rubber said on Wednesday (Nov 15) longtime CEO Richard Kramer has decided to retire next year and also unveiled initiatives to streamline its business, months after settling with activist investor Elliott. Goodyear said the board is considering both internal and external candidates to succeed Kramer, who has served as the CEO since 2010. Kramer will also step down as president and chairman. The company will pursue strategic alternatives for its chemical business, its Dunlop brand and its Off-the-Road equipment tire business. Goodyear expects gross proceeds in excess of US$2 billion from its portfolio optimisation initiatives and a doubling of segment operating margin to 10% by the fourth quarter of 2025 from about 5% currently.
Target on Wednesday topped Wall Street’s quarterly sales expectations and blew past earnings estimates, as purchases in high-frequency categories like food and beauty helped prop up weaker customer spending. Shares of the company rose more than 15% on the news in midday trading, partially a reflection of the stock’s drop so far this year. Yet the big-box retailer stared down the same challenges that it has faced over the past year. Shoppers aren’t buying much more than the necessities. They’re hungry for lower prices. And when they do make purchases, they’re postponing them – such as waiting until the temperature drops to buy a pair of jeans or a sweatshirt, CEO Brian Cornell said on a call with reporters.
Current homeowners and potential homebuyers are responding to lower mortgage rates, albeit slowly. Mortgage demand rose 2.8% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. That was the second straight week of gains. After dropping sharply the previous week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) remained unchanged at 7.61% last week, with points decreasing to 0.67 from 0.69, including the origination fee, for loans with a 20% down payment.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
Recommendation: BUY (Maintained); TP S$1.57, Last close: S$1.31; Analyst Paul Chew
– 3Q23 normalised PATMI jumped 48% YoY to S$48mn and was within our expectations. Revenue was softer than expected. 9M23 revenue and PATMI were 73% and 78% of our FY23e forecast.
– Earnings growth was driven by a turnaround in the UK bus operation and growth in Singapore taxi operations. UK benefited from higher pricing through contract indexation and renewal. Singapore taxi margins expanded with platform fees.
– We lower our FY23e revenue by 4% and PATMI is maintained. Our BUY recommendation and DCF target price of S$1.57 is unchanged. Earnings momentum will be sustained by higher bus service fees in the UK, taxi platform fees in Singapore and lagged pricing of rail services in Singapore.
PSR Stocks Coverage
For more information, please visit:
Corporate Insights by Keppel REIT
Date & Time: 16 Nov 2023 | 12pm – 1pm
Corporate Insights by NIO [NEW]
Date & Time: 18 Nov 2023 | 10pm – 12pm
Corporate Insights by CSE Global
Date & Time: 22 Nov 2023 | 12pm – 1pm
Corporate Insights by First REIT
Date & Time: 28 Nov 2023 | 12pm – 1pm
PHILLIP RESEARCH IN 3 MINS
Phillip Research in 3 minutes: #29 Keppel Corporation; Initiation
Click here for more on Phillip in 3 mins.
The information contained in this email and/or its attachment(s) is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided in this email do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the e investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or investing in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein is suitable for you. PhillipCapital and any of its members will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached to this email. The information and/or materials provided 揳s is?without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
This e-mail and its attachment(s) may contain privileged or confidential information, which is intended only for the use of the recipient(s) named above. If you have received this message in error, please notify the sender immediately and delete all copies of it. If you are not the intended recipient, you must not read, use, copy, store, disseminate and/or disclose to any person this email and any of its attachment(s). PhillipCapital and its members will not accept legal responsibility for the contents of this message. Thank you for your cooperation.