Daily Morning Note – 17 February 2022
Asian stocks looked set for a steady open Thursday after the latest minutes from the Federal Reserve reiterated its hawkish turn while avoiding big surprises. Investors are also monitoring the Ukraine standoff.
Australian shares rose, while futures for Japan and Hong Kong were little changed. U.S. contracts were stable after a mixed U.S. session that ended with a small S&P 500 gain and saw Treasury yields and the dollar retreat.
Oil slid amid signs that an Iranian nuclear deal is getting closer, which could pave the way for a resumption of official exports from the Persian Gulf producer. Crude lately has also been whipsawed by supply worries stemming from the Russian troop buildup on Ukraine’s borders.
The Fed minutes showed officials in January concluded they would start raising interest rates soon and were on alert for persistent inflation that would justify faster tightening. There were few new details on balance-sheet runoff plans.
Stocks to watch: UOB
With UOB’s fourth quarter net profit up 48 per cent on strong loan growth and the bank logging record-high fee income for the year, its chief executive Wee Ee Cheong has sounded an optimistic note on the long-term potential of his bank’s business in Asean. “We believe the worst is behind us. In Singapore, we see market recovery and improving consumer sentiment. In South-east Asia, green shoots of recovery are strengthening,” said Wee at a media conference following UOB’s release of its quarterly and full-year results on Wednesday (Feb 16). The bank also noted that impending interest rate hikes will likely bode well for earnings in the coming quarters. It believes that the rate increases will be gradual and that credit quality will not be significantly affected.
Prime US Reit on Wednesday (Feb 16) posted distribution per unit (DPU) of US$0.0345 for the second half of the year ended December 2021, up 0.9 per cent from a DPU of US$0.0342 in the corresponding year-ago period. This took the Reit’s DPU for the full FY2021 to US$0.0678, down 2.3 per cent from US$0.0694 in FY2020. The book closure date for H2 distributions is Feb 24, and unitholders can expect to receive payments on Mar 31. Gross revenue for H2 was up 17 per cent year on year to US$84.7 million from US$72.4 million, due to contributions from the acquisition of One Town Center and Sorrento Towers which were acquired in July last year.
OUE Commercial Real Estate Investment Trust on Wednesday (Feb 16) posted a distribution per unit of S$0.0137 for the second half of the fiscal year ended December 2021, down 4.2 per cent from DPU of S$0.0143 in the comparable year-ago period. This propped up the Reit’s full year DPU to S$0.0260, 7 per cent higher than DPU of S$0.0243 in FY2020. The H2 distribution is expected to be paid out on Mar 30, after the book closure date on Feb 24.
SIA Engineering has entered into an agreement with maintenance, repair and overhaul (MRO) service provider SR Technics Switzerland to acquire a 75 per cent stake in SR Technics Malaysia for US$3.75 million to form an MRO joint venture (JV). In a Wednesday (Feb 16) announcement, SIA Engineering said the JV will complement its own existing component repair and overhaul services, and fleet management programmes. The US$3.75 million price tag of the stake that SIA Engineering will acquire will be paid in cash. SR Technics will retain the remaining 25 per cent stake.
Property player Chip Eng Seng stemmed some losses in the second half of the fiscal year 2021 ended December, paring its H2 net loss to S$31.6 million versus S$56.7 million in the comparable year-ago period. It registered a net profit of S$99,000 in H1. Loss for the full year came in at S$31.5 million, versus a loss of S$81.1 million in FY2020. The improved performance in H2 came chiefly on the back of a 28.2 per cent year-on-year lift in overall revenue to S$493 million from S$384.7 million, owing to higher topline contributions from the construction, hospitality and education divisions. These were, however, partially offset by lower contributions from the property development segment.
Singapore Airlines (SIA) has ordered 22 additional GE9X engines from GE Aviation to power its fleet of Boeing 777-9 aircraft for a total of US$2.8 billion, GE said. The agreement also includes a 12-year services contract for the jet engines. In a press statement on Wednesday (Feb 16), GE said SIA initially ordered 40 GE9X engines from the engine supplier in 2017 and currently has a total of 31 Boeing 777-9 aircraft on order. SIA is scheduled to be the first airline in the Asia-Pacific region to operate the new generation widebody Boeing 777-9 aircraft.
Consumer spending bounced back sharply in January as rising inflation and a post-holiday surge kept cash registers ringing, the Commerce Department reported Wednesday. Retail sales for the month rose 3.8%, much better than the 2.1% Dow Jones estimate. The numbers are not adjusted for inflation, so the 7.5% rise in the consumer price index for the month helped push a reversal from the 2.5% decline in December, which was revised lower from the initially reported 1.9% drop.
Google on Wednesday announced it’s adopting new privacy restrictions that will cut tracking across apps on its Android devices, following a similar move made by Apple last year that upended several firms’ advertising practices. Google said it’s developing new privacy-focused replacements for its advertising ID, a unique string of characters that identifies the user’s device. The digital IDs in smartphones often help ad-tech companies track and share information about consumers. The changes could impact big companies that have relied on tracking users across apps, like Facebook-parent Meta. Apple’s tweaks hit Meta particularly hard, for example. Meta said earlier this month Apple’s privacy changes will decrease the social media company’s sales this year by about $10 billion. That news contributed to wiping $232 billion from the company’s market cap in a single day, eventually pushing the company’s below $600 billion. Meta was worth more than $1 trillion back in June 2021.
Federal Reserve officials set plans into motion at their most recent meeting to begin raising interest rates and shed the trillions of dollars in bonds on the central bank balance sheet, according to minutes released Wednesday. Some officials at the meeting expressed concerns over financial stability, saying that loose monetary policy could be posing a substantial risk. They indicated that interest rate hikes likely are on the way soon, and they said the unwind of the bond portfolio could be aggressive. “Participants observed that, in light of the current high level of the Federal Reserve’s securities holdings, a significant reduction in the size of the balance sheet would likely be appropriate,” the meeting summary stated.
Cisco shares rose as much as 5% in extended trading on Wednesday after the enterprise software and hardware maker disclosed fiscal second-quarter earnings that surpassed analysts’ expectations. Here’s how the company did: Earnings: 84 cents per share, adjusted, vs. 81 cents per share as expected by analysts, according to Refinitiv. Revenue: $12.70 billion, vs. $12.65 billion as expected by analysts, according to Refinitiv. Revenue increased by 6% year over year in the quarter, which ended Jan. 29, according to a statement. In the previous quarter revenue had risen 8%. “There are still significant constraints with semiconductors, preventing us from completing manufacturing of some of our products, and that remains a headwind to revenue growth despite very strong demand,” Cisco CEO Chuck Robbins said on a conference call with analysts. He said he isn’t sure when components would become more readily available.
Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR
Recommendation: ACCUMULATE (Maintained); TP S$2.86, Last close: S$2.55; Analyst Paul Chew
– 9M22 revenue/EBITDA met expectations at 76%/72% of our FY22e estimates. Underlying PAT of S$473mn was flat YoY.
– Mobile earnings expanded in Singapore, Australia and India. The Philippines was the key drag. Rising ARPU and cost controls were the key drivers of earnings growth.
– Enterprise earning was sluggish from legacy services and lower project wins.
– We kept our FY22e forecast largely unchanged before incorporating S$261mn net gain from disposal of Australia Tower Network. As roaming revenue returns, economic conditions improve and competition is more benign, we expect mobile to enjoy earnings growth in FY22e and FY23e. We maintain our ACCUMULATE recommendation and SOTP TP of S$2.86.
Click the link to join: https://t.me/stocksbnb
For any research-related matters, email: firstname.lastname@example.org
For general enquiries, email: email@example.com
or call 6531 1555.
Read the research report(s), available through the link(s) above, for complete information including important disclosures Important Information
The information contained in this email is provided to you for general information only and is not intended to create any binding legal relation. The information or opinions provided in this email do not constitute investment advice, a recommendation, an offer or solicitation to subscribe for, purchase or sell any investment product. 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 should obtain advice from a financial adviser before making a commitment to invest in any investment product or service. In the event that you choose not to obtain advice from a financial adviser, you should assess and consider whether the investment product or service is suitable for you before proceeding to invest.
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.