DAILY MORNING NOTE | 19 May 2023

SINGAPORE shares finished higher on Thursday (May 18) alongside major regional peers, tracking overnight gains on Wall Street as fears abated over the US debt ceiling crisis with talks progressing. Singapore shares inched up 8.71 points or 0.3 per cent to 3,182.55, following gains in US stocks after the Biden administration said that a deal on raising the debt ceiling could be reached as soon as this week. Key gauges across the region rose, from Japan – a clear outperformer – Hong Kong and Taiwan to China, South Korea, Malaysia and Australia.

ALL three major US stock-market indexes closed higher on Thursday following better-than-expected earnings results for Walmart and optimism over the future profitability of artificial intelligence (AI). The tech-rich Nasdaq Composite Index ended the day up more than 1.5 per cent at 12,688.84. The broad-based S&P 500 gained 0.9 per cent to 4,198.05, while The Dow Jones Industrial Average finished up 0.3 per cent to 33,535.91.

SG

Singapore and Kenya have agreed to ratify a bilateral investment treaty and an avoidance of double taxation agreement that had been signed earlier, paving the way for greater trade and investment activity between the two countries.

GRAB reported a loss of US$250 million in Q1 2023, narrowing from US$435 million in Q1 2022.This comes on the back of lower net interest expenses and improved group adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) Revenue rose 130 per cent in Q1 2023 to US$525 million from US$228 million in the year before. This was attributed to growth across all business segments, reduction in incentives and a change in business model for certain delivery offerings in one of its markets. Without the change in business model, Q1 2023’s revenue growth would have been 50 per cent year on year.

JARDINE Matheson Holdings (JMH) said in an interim management statement on Thursday (May 18) that it had achieved a “strong overall performance” in the first quarter of the year ended March, but warned that challenges remain from the global economic environment and softening commodity prices.

NetLink NBN Trust on Thursday (May 18) reported earnings of S$54.7 million for the second half of its fiscal year ended March, up 6.9 per cent from S$51.2 million in the corresponding year-ago period. With the stronger bottom-line showing, the company sweetened its distribution payout to shareholders, doling out a record-high total full-year distribution of S$0.0524 per unit for FY2023.

US

OIL prices slid about 1 per cent on Thursday after solid US economic data spurred the dollar to reach a two-month high on growing expectations the US Federal Reserve could raise interest rates again in June. Brent futures fell US$1.10, or 1.4 per cent, to settle at US$75.86 a barrel. US West Texas Intermediate (WTI) crude fell 97 cents, or 1.3 per cent, to settle at US$71.86. The US dollar rose to its highest since March 17 against a basket of currencies on data showing lower-than-expected initial jobless claims and optimism about a possible debt ceiling deal.

THE US Supreme Court on Thursday (May 18) refused to clear a path for victims of attacks by militant organisations to hold social media companies liable under an anti-terrorism law for failing to stop the groups from using their platforms, handing a victory to Twitter.

APPLE has lowered sales estimates for its long-awaited mixed-reality headsets by about two-thirds, Bloomberg News reported on Thursday (May 18), citing people familiar with the matter. The iPhone-maker had initially hoped to sell about 3 million units a year, but has now pared back those estimates to about 1 million, and then to 900,000 units, the report said. The headset is expected to cost around US$3,000. Meta Platform’s Quest Pro virtual and mixed reality headset is priced at about US$1,000.

BLACKSTONE president Jon Gray said last month that private credit is having a “golden moment” as fund managers take advantage of tighter credit after recent banking turmoil. Left unsaid was that a big push in Europe is proving an exception. Almost six months after starting a fund targeting the region’s wealthy, the firm’s figures show it’s amassed 240 million euros (S$348.7 million) for the product – through investor commitments and fund leverage – which is designed to provide alternative financing for private equity buyout deals. It’s a paltry amount compared with the US$12 billion raised for an equivalent US fund, dubbed BCRED, at the half-year point.

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

RESEARCH REPORTS

Hyphens Pharma International – Disruption in specialty pharma supply

Recommendation: BUY (Maintained); TP S$0.39 Last close: S$0.28; Analyst Paul Chew

– 1Q23 results were below expectations. Revenue and PATMI were 19%/10% of our forecasts. Revenue suffered from the cessation of Biosensors and delay shipments in Vietnam.

– Specialty pharma revenue declined by 27%. The loss of Biosensor distribution in Dec 22 was well flagged. The surprise was supply disruption from three specialty pharma manufacturers.

– We cut our FY23e earnings by 31% to S$9.1mn and the DCF target price is lowered to S$0.39 (prev. S$0.445). Our BUY recommendation is maintained. We expect the supply constraints to spill over into 2Q23. Proprietary brands have performed well with 16% growth. It will be a multi-year journey for proprietary brands to reach scale and compete even more effectively in the region. Investments into DocMed, another $5.4mn over the next 2-3 years could drag earnings but can be deemed as one-off upfront cost to develop the platform.

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