DAILY MORNING NOTE | 2 April 2024

Trade of The Day

Genting Singapore Ltd (SGX: G13)

Analyst: Zane Aw

(Current Price: S$0.905) – TECHNICAL BUY
Buy price: S$0.905 Stop loss: S$0.880 (-2.76%)
Take profit 1: S$0.960 (+6.08%) Take profit 2: S$0.990 (+9.39%)

Factsheets


CapitaLand Ascendas REIT (SGX: A17U)

Analyst: Zane Aw

(Current Price: S$2.78) – TECHNICAL BUY
Buy price: S$2.78 Stop loss: S$2.70 (-2.88%)
Take profit 1: S$2.91 (+4.68%) Take profit 2: S$2.97 (+6.83%)

Factsheets


Trades Initiated in the past week

Factsheets


Singapore shares climbed 0.3 per cent on Monday (Apr 1) after the Good Friday weekend. Offshore and marine company Seatrium was the top gainer as it climbed 10.1 per cent or S$0.008 to S$0.087. Technology-services provider Venture Corporation was the biggest loser, closing down 1 per cent or S$0.14 to S$14.13. Two of the three local banking stocks gained ground. UOB was up 0.4 per cent or S$0.13 to S$29.44, and OCBC gained 0.5 per cent or S$0.07 to S$13.56. DBS, however, contracted 0.3 per cent or S$0.12 to S$35.91.

Wall Street stocks mostly retreated on Monday following US manufacturing data that pointed to both rising activity and pricing pressure. The Institute for Supply Management’s March survey is the first to show manufacturing growth since September 2022. The tech-rich Nasdaq Composite Index still mustered a modest gain, winning 0.1 per cent to 16,396.83. But the Dow Jones Industrial Average dropped 0.6 per cent to 39,566.85, while the broad-based S&P 500 shed 0.2 per cent to 5,243.77.

Top gainers & losers

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Events Of The Week

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SG

United Overseas Bank (UOB) announced that with effect from May 1, it will be revising the interest rate down and introducing two new balance tiers for all UOB One Account holders, such that the maximum bonus interest earning balance will be increased from S$100,000 to S$150,000. The bank explains that the revision of interest rates is to align with long-term interest rate environment expectations. Amid this, the bank will still be retaining its existing qualifying criteria to allow account holder to earn higher interest in two steps. Account holders can continue to meet eligible card spend with their UOB One Card and/or a wide selection of cards monthly; and have their salary credited into the UOB One Account to accelerate bonus interest rates or make three GIRO debit transactions monthly to unlock higher interest. With these changes, account holders can earn up to S$6,000 in total interest in a year for deposits of S$150,000 when they spend a minimum of S$500 on eligible UOB Cards and credit their salary (minimum S$1.600) via GIRO or PayNow every month.

Isetan Mitsukoshi Holdings, the controlling shareholder of Isetan (Singapore) is offering to take the latter private at S$7.20 per share, valuing the company at around S$309 million. The offer price is at a premium of 173.4% over the last traded price of S$2.63 on March 28. The offer is also at a similar premium of 178.9% over Isetan Singapore’s NAV of S$2.58 per share. According to Isetan Mitsukoshi Holding, which now holds 52.73% of the company, the offer is a rare opportunity for Isetan (Singapore) shareholders to “achieve full liquidity on their investment in the company.” “The shares of the company have had highly limited trading liquidity in the market,” the offeror notes. Isetan Mitsukoshi believes that by taking Isetan (Singapore) private, it can enjoy greater operational efficiencies as a wholly-owned subsidiary.

Best World International says a group of shareholders who had on March 21 requested for an EGM to be held have on April 1 withdrawn their requisition letter. In its announcement via SGX, Best World did not indicate the reason why. Even so, this group of shareholders, who collectively own more than 10% of the company, have reserved their rights to issue another requisition letter down the road. As such, Best World will not take further action for now regarding the requisition. According to Best World in its previous announcement on March 22, this group of shareholders are taking issue with the remuneration of the directors, and they want to oust the three independent directors now on the board. In addition, they want the company to appoint an independent financial adviser to help gauge an appropriate level of dividends that ought to be paid, given how Best World has refrained from doing so even though it has a cash balance of S$574 million as at Dec 31 2023. As indicated by Best World then, this group of shareholders are willing to work towards a “common ground”. Separately, Best World had on March 22 announced plans to launch a selective capital reduction exercise so that the existing controlling shareholders can privatise the company.

Keppel Real Estate Investment Trust (Reit) has agreed to acquire a 50 per cent interest in a freehold Grade A office building in Sydney’s central business district (CBD) for A$363.8 million (S$321 million). The remaining interest for the property at 255 George Street will continue to be held by the seller, Mirvac Funds Management Australia Limited, as trustee of Mirvac Wholesale Office Fund I. Keppel Reit’s manager on Monday (Apr 1) said the property is expected to generate a first-year yield that exceeds 6 per cent and distribution per unit accretion of 1.4 per cent on a pro-forma basis. The building has a total net lettable area of 38,996.8 square metres (sq m), including 38,805.0 sq m of office space and 191.8 sq m of retail space, as well as 188 car park lots. Key tenants of the space include the Australian Taxation Office and the Bank of Queensland, alongside others from the government, financial institutions, healthcare and information technology. As at Dec 31, 2023, the property had a committed occupancy rate of 93 per cent, with no significant lease expiries from 2024 to 2028. Keppel Reit’s manager also noted that the property had stable cash flows underpinned by a weighted average lease expiry of 6.8 years. Following the acquisition, Keppel Reit’s Singapore-centric portfolio will be worth approximately S$9.6 billion across 13 properties in the city state, which would constitute 76.5 per cent of the Reit’s total assets under management (AUM). Other assets held by the Reit are in Australia (19.3 per cent of AUM), South Korea (3.3 per cent of AUM), and Japan (0.9 per cent of AUM). The Reit’s proportion of freehold assets in its portfolio will increase from 33.2 percent to 36.4 per cent. The George Street acquisition builds on Keppel Reit’s existing partnership with Mirvac, as they already jointly own 8 Chifley Square in Sydney and David Malcolm Justice Centre in Perth.

Keppel and Keppel Infrastructure Trust (KIT) on Monday (Apr 1) proposed to amend and extend the capacity tolling agreement for the Keppel Merlimau Cogen (KMC) power plant by 10 years, from 2023 to 2040. The move is expected to generate up to nearly S$1.1 billion in long-term capacity payments for KMC, providing a stable base of contracted cash flows, said Keppel and KIT. These cash flows will support the refinancing of KMC’s existing loan facility, unlocking value for shareholders as the asset will resume its contributions to Keppel and KIT. Furthermore, the operations and maintenance contract between KMC and Keppel’s infrastructure division will also be amended and extended by another 10 years to 2044. This is worth up to some S$342.8 million. Assuming the capital restructuring of KMC was effected on Jan 1, 2023, KIT’s distribution per unit would be 11 per cent higher at S$0.0428 instead of S$0.0386, based on pro forma estimates. KIT and Keppel respectively own a 51 per cent and a 49 per cent stake in KMC – a combined cycle gas turbine power plant with a generation capacity of about 1,300 megawatts. The plant, located on Jurong Island in Singapore, is the first independent power project to enter the Republic’s electricity market since the National Electricity Market was implemented in 2003. It has been operational since 2007. The proposed amendment and extension of the capacity tolling agreement and the operations and maintenance contract will be subject to approval from Keppel shareholders and KIT unitholders at extraordinary general meetings to be convened.

Sembcorp Industries has, through its wholly-owned subsidiary, Sembcorp Energy (Shanghai) Holding Co., Ltd. (SESH), signed a dual currency denominated revolving credit facility with DBS Bank (Hong Kong) Limited. The revolving credit facility, which is guaranteed by Sembcorp Utilities, will provide Sembcorp access to RMB400 million (S$74.7 million) or an equivalent amount in Hong Kong dollars (HKD). The facility has an initial tenure of three years with the option to extend for another two years. According to Sembcorp, it will use the facility for general corporate purposes including refinancing, capital expenditure, working capital, equity investments, and funding mergers and acquisitions in China. The country is said to be a key market for Sembcorp, with the group seeing attractive opportunities in the renewable sector there. The establishment of this offshore RMB facility enhances the group’s capital base to fund its growth, says Sembcorp.

The manager of Digital Core REIT (DC REIT) has acquired an additional 10% interest in Digital Osaka 2 TMK. Digital Osaka 2 TMK holds the data centre located at 6-chome, Ao-kita, Saito, Minoh-city, Osaka, Japan. The share purchase agreement (SPA) was entered into between the REIT manager’s wholly-owned subsidiary, Digital CR Singapore 4 Pte. Ltd., Japan Branch, and a third-party vendor, Mitsubishi Corporation, on March 29. The acquisition was completed on the same day. The consideration for the 10% stake is JPY7.73 billion (S$68.9 million). It is based on the agreed value of JPY77.25 billion. It takes into account the estimated net assets and liabilities of Digital Osaka 2 TMK as at the date of closing. The data centre is a freehold fully-fitted facility located in Osaka, Japan. It comprises 114,940 net rentable sq ft as at Dec 31, 2023. According to the REIT manager, it is 95% occupied and is mainly leased to leading global cloud providers. The total acquisition outlay is expected to cost the REIT JPY7.83 billion, including fees and the consideration. The data centre’s existing asset manager is MC Digital Realty, Inc. Mitsubishi Corporation holds a 50% stake in the asset manager while a wholly-owned subsidiary of Digital Realty Trust, L.P. holds the remaining 50%. According to the REIT manager, the acquisition will expand its presence in a top-tier global data centre market characterised by robust, diverse and durable customer demand.


US

Tesla on Monday raised prices for all Model Y cars in the United States by US$1,000, according to its website. The Model Y base variant will now cost US$44,990, while the long range and performance variants are priced at US$49,990 and US$53,490, respectively, according to the Tesla website. Tesla had said in March that it will increase prices for all Model Y cars in the United States by US$1,000 on April 1.

United Parcel Service will become the United States Postal Service’s (USPS) primary air cargo provider, the company said on Monday (Apr 1), as rival FedEx walked away after pressing for a better new contract with the US agency. Financial terms of the contract, which is set to take effect after a “transition period”, were not disclosed. UPS said the postal service’s award was “significant.” USPS is the largest customer for FedEx’s air-based Express segment. The company has said it was prepared to walk away from the 22-year relationship if the terms of the existing contract, set to expire on Sep 29, did not improve. FedEx, which has been on a drive to rein in expenses to combat sagging freight demand and a bloated cost structure, said on Monday it would not extend its contract with USPS. “The parties were unable to reach agreement on mutually beneficial terms to extend the contract,” FedEx said in a securities filing. As the No. 1 USPS domestic air contractor, FedEx had supported the agency’s Priority Mail and other quick services. A lapse of the domestic contract with USPS would erase nearly US$2 billion in annual business that funds hundreds of pilot jobs at FedEx. The parcel delivery firm is yet to reach a new contract agreement with its pilots. USPS’ payments to FedEx shrank to about US$1.73 billion in fiscal 2023, from US$2.4 billion during the fiscal year ended September 2020 after the postal service shifted letters and packages from planes to more economical trucks.

Microsoft will sell its chat and video app Teams separately from its Office product globally, the US tech giant said on Monday, six months after it unbundled the two products in Europe in a bid to avert a possible EU antitrust fine. The European Commission has been investigating Microsoft’s tying of Office and Teams since a 2020 complaint by Salesforce-owned competing workspace messaging app Slack. Teams, which was added to Office 365 in 2017 for free, subsequently replaced Skype for Business and became popular during the pandemic due in part to its video conferencing. Rivals, however, said packaging the products together gives Microsoft an unfair advantage. The company started selling the two products separately in the EU and Switzerland on Aug. 31 last year. “To ensure clarity for our customers, we are extending the steps we took last year to unbundle Teams from M365 and O365 in the European Economic Area and Switzerland to customers globally,” a Microsoft spokesperson said. “Doing so also addresses feedback from the European Commission by providing multinational companies more flexibility when they want to standardise their purchasing across geographies.” Microsoft said in a blogpost that it was introducing a new lineup of commercial Microsoft 365 and Office 365 suites that do not include Teams in regions outside the EEA (European Economic Area) and Switzerland, and also a new standalone Teams offering for Enterprise customers in those regions. Starting April 1, customers can either continue with their current licensing deal, renew, update or switch to the new offers. For new commercial customers, prices for Office without Teams range from US$7.75 to US$54.75 depending on the product while Teams Standalone will cost US$5.25.

Electric vehicle manufacturer Canoo Inc warned on Monday about its dwindling cash and its ability to continue as a going concern, in further signs that slowing EV demand is significantly impacting startups. Canoo, which has contracts with the U.S. Defense Department for supply of advanced battery packs, said that if the company was unable to obtain sufficient additional funds, it may require to curtail or terminate operations.

China’s Xiaomi is advising potential buyers of its SU7 electric sedan that they could face waits of four to seven months, in a sign of strong demand for its first-ever vehicle. The maker of smartphones and other consumer electronics began taking orders on Thursday and said pre-orders hit 88,898 in the first 24 hours. Deliveries for the standard SU7 model, priced at 215,900 yuan (US$29,870), may take 18-21 weeks, according to Xiaomi’s car app. Deliveries for the SU7 Pro model could take 18-21 weeks, while the most expensive model, priced at 299,900 yuan, could take 27-30 weeks.

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


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