DAILY MORNING NOTE | 2 August 2023

Trade of the Day

Peloton Interactive, Inc. (NASDAQ: PTON)

Analyst: Zane Aw
(Current Price: US$9.71) – TECHNICAL BUY
Buy stop price: US$9.87 Stop loss: US$8.50
Take profit 1: US$11.80 Take profit 2: US$14.30

Singapore stocks fell 0.01 per cent on Tuesday (Aug 1) amid mixed trading in the region. Singapore Airlines led the decliners, slipping 4.1 per cent or S$0.31 to S$7.22. The counter was trading on an ex-dividend basis. Other top decliners for the day included Jardine Matheson, which fell 2 per cent or US$0.98 to US$48.40 and DFI Retail Group which was down 1.9 per cent or US$0.05 to US$2.64. Tuesday’s top gainer was Hongkong Land, which rose 3.1 per cent or US$0.11 to close at US$3.67.

Wall Street stocks ended mostly lower on Tuesday (Aug 1) amid a slew of corporate earnings results, while US manufacturing activity contracted for a ninth straight month in July according to the Institute for Supply Management. The broad-based S&P 500 shed 0.3 per cent to 4,576.73 while the Nasdaq Composite Index fell 0.4 per cent to 14,283.91. The Dow Jones Industrial Average gained 0.2 per cent, ending at 35,630.68.

SG

Frasers Logistics and Commercial Trust (FLCT) reported portfolio occupancy of 96.2% and weighted average lease expiry of 4.4 years at the end of 3QFY2023 ended June, compared to 95.9% and 4.5 years in the previous quarter. As at June 30, FLCT has 99 logistics and industrial properties and eight commercial properties, with a total portfolio value of some $6.9 billion. Total net lettable area is 2.7 million sq m, and while the logistics and industrial properties are 100% occupied, the commercial properties have an occupancy rate of 90.6%. Its gearing was up 0.7 percentage points (ppts) q-o-q to 28.6% as at June 30, while cost of borrowing also inched up 0.2% ppt to 2.0%. During the quarter, FLCT leased and renewed 67,600 sq m of space, with positive portfolio rental reversion of 9.8% on an incoming rent versus outgoing rent basis. On an average rent basis, rental reversion was also positive at 21.4%.

Coliwoo, a co-living subsidiary brand under real estate management services group, LHN Limited, recently unveiled its latest property launch, Coliwoo River Valley 298. This four-storey service apartment is located in the opulent neighbourhood of River Valley and is a few minutes’ walk from Fort Canning MRT Station, providing tenants with easy and convenient access to various shopping, entertainment and fitness hubs. Coliwoo River Valley 298 is the first step in a series of exciting plans for the neighbourhood. With two additional River Valley properties looking to enter the fray under Coliwoo’s brand by 2024 (subject to completion of the acquisitions), Singapore’s largest co-living operator will be looking to expand its available keys within the vicinity.

CSE Global Limited has secured two major contracts worth $86.4 million in the US and Singapore, announced the company on Aug 1. The first major contract is for the design and manufacturing of power distribution centres, as well as the integration of complex electrical and control systems and equipment in the US, which is slated for execution from 2024 to 2025. The second major contract relates to a multi-year maintenance contract for the Singapore government in the infrastructure sector, which will commence from 2H2023 and last till 2028. These contracts are not expected to have any material impact on the consolidated net tangible assets per share or earnings per share of the group for the current financial year.

Great Eastern Holdings has confirmed it is in talks to acquire Malaysian insurer AmMetLife. In an Aug 1 bourse filing, Great Eastern says discussions for the acquisition are “currently ongoing” but the process is “at a preliminary stage”. “There is no certainty that any definitive or binding agreement will be entered into pursuant to these discussions.” Great Eastern says it will comply with applicable rules to make the relevant disclosures at the appropriate time.

US

Advanced Micro Devices reported a revenue decline of 18% in its fiscal second-quarter earnings report on Tuesday. Earnings was 58 cents per share, adjusted, versus 57 cents per share expected by consensus estimates while revenue came in at US$5.36 billion versus US$5.31 billion expected. Net income was US$27 million, or 2 cents per share, down from US$447 million, or 27 cents per share, in the year-ago period. AMD’s data center segment reported a decline of 11% to $1.3 billion, which the company said was due to lower server processor sales. Some cloud providers had extra inventory during the quarter, the chipmaker said. Revenue at its client business fell 54 per cent to US$998 million from US$2.2 billion a year ago. For the third quarter, AMD said it expects US$5.7 billion in sales, while analysts were looking for revenue of US$5.81 billion. The chipmaker said that it expected its data center and embedded divisions to grow on a fiscal year basis.

NIO Inc. announced its July 2023 delivery results which saw 20,462 vehicles delivered in the month, representing an increase of 103.6% year-over-year. The deliveries consisted of 14,066 premium smart electric SUVs, and 6,396 premium smart electric sedans. Cumulative deliveries of NIO vehicles reached 364,579 as of July 31, 2023. Deliveries of the All-New ES6, a smart electric all-round SUV, have been growing solidly since its debut in late May 2023, and exceeded 10,000 units monthly in July 2023. In July 2023, both ET5 and EL7 were awarded the five-star rating in 2023 Euro NCAP safety tests. Both models achieved the best Euro NCAP scores since 2020 for sedans and SUVs respectively in the vehicle crash tests for occupant protection.

Meta is preparing to launch a range of artificial intelligence-powered chatbots that exhibit different personalities as soon as next month, in an attempt to boost engagement with its social media platforms. The tech giant led by chief executive Mark Zuckerberg has been designing prototypes for chatbots that can have humanlike discussions with its nearly 4bn users, according to three people with knowledge of the plans. The chatbots could launch as soon as September, the person said. Their purpose will be to provide a new search function and offer recommendations, as well as being a fun product for people to play with. On top of boosting engagement, chatbots could collect vast new amounts of data on users’ interests, said experts. That could help Meta better target users with more relevant content and adverts.

Pfizer reported a bigger-than-expected 54 per cent decline in second-quarter revenue on Tuesday (Aug 1), as the US drugmaker faced declining demand for its Covid-19 products. The company has said it expects 2023 to be a low point for Covid product sales following strong demand at the peak of the pandemic before a potential return to growth in 2024. Pfizer is also preparing for declining revenues in coming years as some of its top-selling drugs are soon set to face competition from cheaper generic treatments. Pfizer also trimmed the upper end of its annual revenue forecast, and now expects sales between US$67 billion and US$70 billion, compared with US$67 billion to US$71 billion forecast earlier. Quarterly sales of vaccine Comirnaty declined 83 per cent to US$1.49 billion, while antiviral treatment Paxlovid sales tumbled 98 per cent to US$143 million. Analysts had expected sales of US$1.40 billion for the vaccine and US$1.08 billion for Paxlovid. Total revenue for the second quarter at US$12.73 billion missed analysts’ estimates of US$13.27 billion. Excluding items, Pfizer reported a profit of 67 US cents per share, compared with analysts’ estimates of 57 US cents.

Uber Technologies, Inc. reported for second quarter 2023 gross bookings grew 16% year-over-year (“YoY”) to US$33.6 billion, or 18% on a constant currency basis, with mobility gross bookings of US$16.7 billion (+25% YoY or +28% YoY constant currency) and delivery gross bookings of US$15.6 billion (+12% YoY or +14% YoY constant currency). Trips during the quarter grew 22% YoY to 2.3 billion, or approximately 25 million trips per day on average. Revenue grew 14% YoY to US$9.2 billion, or 17% on a constant currency basis. Income from operations was US$326 million, up US$1.0 billion YoY and US$588 million quarter-over-quarter (“QoQ”). Net income attributable to Uber Technologies, Inc. was US$394 million, which includes a US$386 million benefit (pre-tax) primarily due to net unrealized gains related to the revaluation of Uber’s equity investments. Adjusted EBITDA of US$916 million, up US$552 million YoY.

Caterpillar Inc. posted profit that exceeded Wall Street’s expectations amid resilient demand for the company’s iconic yellow machinery across all its major business segments. Caterpillar’s adjusted profit of US$5.55 a share topped the US$4.54 average estimate of analysts, helped by successful price hikes to customers of its machinery, along with surging sales. Still, Caterpillar said it expects lower revenue in the third quarter and will incur restructuring costs of about US$700 million for the year.

Norwegian Cruise Line Holdings Ltd. reported second quarter total revenue of US$2.2 billion, a record for the Company and GAAP net income of US$86.1 million, or EPS of US$0.20. Adjusted EBITDA came in at approximately US$515 million and adjusted EPS was US$0.30, above guidance of US$485 million and US$0.25 respectively. Second quarter outperformance was driven by solid revenue performance, lower costs and favorable fuel pricing. Full year 2023 Adjusted EPS guidance improved US$0.05 to approximately US$0.80 reflecting second quarter outperformance and continued strong results expected for the remainder of 2023. Adjusted EBITDA guidance improved to the range of US$1.85 to US$1.95 billion.

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

RESEARCH REPORTS

Meta Platforms Inc. – Spike in revenue guidance

Recommendation : ACCUMULATE (Upgraded); TP: US$360.00, Last Close: US$318.60

Analyst: Jonathan Woo

– 2Q23 results were in line with expectations. 1H23 revenue/PATMI at 47%/43% of our FY23e forecasts.

– Double-digit growth in advertising after 5 quarters, outbound China spending and increasing Reels monetisation the main drivers. Guided 3Q23e revenue growth of 20% YoY.

– ~US$40bn in accumulated losses from Reality Labs and no timeline to profitability. A 12% drag on operating margin.

– We increase our FY23e revenue/PATMI estimates by 3%/2% to reflect a slightly faster recovery in advertising, and improvements in Reels monetisation. Additionally, FY23e CAPEX is cut by 10% due to delays in projects and equipment deliveries. Our WACC assumption of 7.1% remains unchanged, and our terminal growth rate assumption is increased to 4.5% (from 3.5%) due to higher ad monetisation rates. We upgrade to ACCUMULATE, with a raised DCF target price of US$360.00 (prev. US$235.00).

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