DAILY MORNING NOTE | 18 August 2023
Trade of the Day
Analyst: Zane Aw
(Current Price: HKD$64.40) – TECHNICAL BUY
Buy price: HKD$64.40 Stop loss: HKD$57.00
Take profit 1: HKD$72.50 Take profit 2: HKD$80.00
Singapore stocks ended Thursday (Aug 17) once again in the red, on news that the country’s July non-oil domestic exports slid 20.2 per cent on year. It dropped 0.5 per cent or 16.83 points to 3,196.75. Losers outnumbered gainers 315 to 289 in the broader market, as 1.1 billion securities worth S$1 billion were traded. Elsewhere in the region, Japan’s Nikkei 225 slid 0.4 per cent to end at 31,626, its lowest level since June, while South Korea’s Kospi Composite Index was down 0.2 per cent on its fifth straight day of losses. FTSE Bursa Malaysia KLCI ended the day down 1.1 per cent. Hong Kong’s Hang Seng Index was mostly flat, as it marginally ticked down 0.01 per cent. The retreat of the regional indices mostly mirrored Wall Street, which slid after the release of the July Federal Open Market Committee minutes.
Wall Street stocks fell for a third straight session as treasury bond yields rose further from multi-year highs, stoking fears about equities and other risk assets. The yield on the 10-year US Treasury note, which hit a 15-year peak on Wednesday (Aug 16), climbed above 4.3 per cent. The Dow Jones Industrial Average finished down 0.8 per cent at 34,474.83. The broad-based S&P 500 fell 0.8 per cent to 4,370.36, while the tech-rich Nasdaq Composite Index dropped 1.2 per cent to 13,316.93. The rise in yields comes amid worries the Federal Reserve could continue to hike interest rates or could leave interest rates at lofty levels for longer to counter sticky inflation.
Singapore’s non-oil domestic exports (NODX) slid 20.2 per cent on the year in July, a sharper fall than June’s 15.6 per cent contraction, data from Enterprise Singapore (EnterpriseSG) showed on Thursday (Aug 17). Marking the 10th straight month of decline, the month’s key exports slide surpassed the median 14.3 per cent drop forecast by economists in a Bloomberg poll. Both electronics and non-electronics exports continued to decline on a year-on-year basis. The month also charted the steepest drop since January 2023, when it had fallen 25 per cent.
Netlink NBN Trust saw its profit after tax inch up 2.1 per cent to S$28.2 million for the first quarter ended Jun 30, thanks to contributions from more ancilliary projects. Revenue for the quarter rose by S$6 million, or 6.2 per cent, to S$103.9 million, NetLink’s trustee-manager announced in an earnings update on Thursday (Aug 17). Of the revenue increase, S$4.1 million came from non-regulated asset base (RAB) revenue, mainly contributed by the trust’s ancillary projects. The remaining S$1.9 million came from RAB revenue, on the back of higher residential, non-residential, non-building address points (NBAP) and segment connections orders. On the basis of earnings before taxes, interest, depreciation and amortisation (Ebitda), NetLink’s bottom line was up 3.1 per cent to S$75.2 million. Ebitda rose by a lower margin than revenue due to higher operating costs, the trustee-manager said. As at Jun 30, there were 1.49 million residential connections and 52,522 non-residential ones, up by 1.3 per cent and 3.3 per cent respectively. The number of NBAP connections grew from 2,479 to 2,757; segment connections grew from 2,170 to 3,003 in the same period.
Automation solutions provider CSE Global has secured three contracts totalling S$47.5 million in the US and Singapore. The company announced in a Thursday (Aug 17) bourse filing that two of the contracts are for the provision of electrification solutions to design, manufacture and integrate power distribution centres and electrical systems and equipment in the US. It is slated for execution from this year to 2025. The third contract involves the supply, installation, integration and maintenance of communication and security systems for the Singapore government. This will be from the second half of 2023 to 2034. CSE group managing director Lim Boon Kheng said that these projects will grow the company’s order book and “are expected to contribute positively to (its) financial performance for the current financial year and beyond”.
Citigroup’s Singapore subsidiary and CIMB Group Holdings are among banks affected by a major money laundering case in the city-state involving about S$1 billion of assets. The two lenders were used in 2020 and 2021 by some of the foreign nationals who were arrested in raids this week across the country, according to charge documents seen by Bloomberg News. Turkish national Vang Shuiming was charged with allegedly submitting a fake document to Citibank Singapore, while Cambodian national Su Baolin was charged with falsely claiming he was an executive director of a firm in a supporting document to the US bank. Meanwhile, two Chinese nationals, Zhang Ruijin and Lin Baoying, were also charged with seeking to cheat CIMB Bank about their ownership and sale of a property in Macau.
An office floor at the freehold Nomu in Handy Road is being sold for nearly S$24 million; this works out to S$3,790 per square foot on a strata area of 6,329 sq ft. The buyer is a Singapore-incorporated entity that is an indirect wholly-owned subsidiary of Bermuda-incorporated IMC Group Holdings. IMC are the initials for International Maritime Carriers, a shipping business founded by the late Frank Tsao in Hongkong in 1966. Tsao also led a consortium comprising Hongkong tycoons that developed the Suntec City complex in Singapore. The IMC Group unit is buying the third level of the 12-storey Nomu, off Orchard Road, from a company owned by Wong Mun Summ and Richard Hassell, the founders of Woha Architects.
A consortium of Ford Motor and South Korean companies on Thursday (Aug 17) said they would build a US$887 million plant to produce electric vehicle (EVs) battery materials in Becancour, Quebec, which is seeking to become an EV-supply-chain hub, Canada’s industry ministry said. The consortium includes South Korean partners EcoPro BM and SK On Co, according to the statement. The factory will eventually produce 45,000 tonnes of cathode active materials (CAM) per year for Ford EVs. Canada’s federal government will provide the consortium with a conditional loan of C$322 million (S$323.4 million) and Quebec will offer the same amount as a partially forgivable loan, the statement said. Construction is expected to start in the first half of 2026 and the plant will create more than 345 jobs.
Bitcoin reached an almost two-month low as risk aversion weighs on the cryptocurrency market, with global government bond yields climbing to the highest in about 15 years. The largest digital asset by market value fell as much as 2.1 per cent to US$28,335 before paring its decline. The drop was the biggest on an intraday basis since Aug 1. Other cryptocurrencies were mixed, with Ether down about 1.2 per cent and Cardano and Solana’s tokens both up around 1.5 per cent. The rise in global yields comes as resilient economic data challenges the view that central banks rates are peaking. Higher interest rates generally lessen the appeal of alternative investments such as cryptocurrencies.
The number of Americans filing new claims for unemployment benefits fell last week, pointing to a still-tight labour market. Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 239,000 for the week ended Aug 12, the Labor Department said on Thursday (Aug 17). Economists polled by Reuters had forecast 240,000 claims for the latest week. The initial claims data can be particularly volatile in the summer months as automakers close for their annual retooling period. The four-week moving average, which smooths out some of that volatility, increased to 234,250.
Walmart raised its full-year forecast on Thursday (Aug 17) following a jump in quarterly profit, pointing to solid increases at US stores and E-commerce. The big retailer, which has been seen as well positioned amid inflation because of its reputation for value, enjoyed another quarter of growing sales at its namesake US stores, with robust demand for groceries and pharmaceuticals offsetting weakness in discretionary consumption and the effects of wage increases. Walmart reported second-quarter profit of US$7.9 billion, up 53 per cent from the year-ago period, a period marred by excess inventories due in part to pandemic supply chain issues. Revenue rose 7.6 per cent to US$152.3 billion.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
Recommendation: BUY (Maintained), Last Done: S$0.69
Target price: TP: S$ 0.90, Analyst: Liu Miaomiao
– 1H23 rental income in SGD terms was within expectations at 47.7% of our estimates (S$62.6m, -1.4% YoY, +8% YoY in RMB), representing a S$0.9m YoY decrease due to the weakening RMB against the S$ by 8.7%, as compared to 1H22.
– Outlet sales in RMB were at 50.9% of our estimations (RMB 2254.1m, +20.5% YoY). The variable component income surged by 20.8% YoY, driven by pent-up consumer demand but offset by depreciation in RMB and higher finance costs.
– The 1H2023 DPU was within expectations at 50.6% (3.322 cents, – 2.6% YoY). SASSR retained 6.7% of distributable income mainly for the repayment of onshore RMB loans.
– We reiterate our BUY recommendation with an unchanged DDM TP of S$0.9. FY23e – FY24e DPU forecasts have been lowered 1.5% – 1% after factoring in a stronger-than- expected depreciation of RMB against SGD.
Recommendation : BUY (Maintained); TP: US$87.00, Last Close: US$40.50
Analyst: Jonathan Woo
– 2Q23 revenue missed expectations marginally due to increased shipping subsidies. Earnings were in line. 1H23 revenue/PATMI was at 46%/103% our FY23e forecasts. We expect break-even in 2H23 due to increased incentives and investments.
– Garena looks to have bottomed out, posting an 8% QoQ increase in operating income after 5 quarters, with an 11%/15% sequential uptick in QAU/QPU.
– Increasing shipping subsidies and marketing spend for Shopee GMV growth to impact both top and bottom line, with potential of operating losses in the near-term.
– We cut our FY24e revenue/PATMI by 3%/3% to reflect increasing shipping subsidies and marketing spend, and we raise our outstanding share denominator by 8% due to share dilution. We maintain BUY with a reduced DCF target price of US$87.00 (prev. US$100.00), with an unchanged WACC of 7.6%, and a terminal growth rate of 3.0%. We still believe SE is well-positioned to capture e-commerce growth in many emerging markets due to increased digitalisation.
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