DAILY MORNING NOTE | 20 January 2023
Trade of the Day
Analyst: Zane Aw
(Current Price: US$0.285) – TECHNICAL BUY
Buy price: US$0.285 Stop loss: US$0.275 Take profit: US$0.310
Technical Pulse: Exxon Mobil Corporation (NYSE: XOM)
Analyst: Zane Aw
(Current Price: US$110.61) – TECHNICAL SELL
Sell price: US$110.61 Stop loss: US$116.50 Take profit: US$96.70
Singapore shares finished trading lower on Thursday (Jan 19), after Wall Street clocked overnight losses following softer economic readings that sparked recession worries. The Straits Times Index (STI) decreased by 13.37 points or 0.4 per cent to 3,276.18 points. The banking trio, which makes up over 40 per cent of the blue-chip barometer in terms of industry weightage, all registered declines.
Wall Street stocks fell again on Thursday amid lingering worries over a recession as a top Federal Reserve official pledged a tough line on inflation. Major US indices were in the red the entire session after losing more than one per cent on Wednesday, following lackluster retail sales data that underscored the risk of a downturn in the world’s biggest economy. The Dow Jones Industrial Average finished down 0.8 per cent at 33,044.56. The broad-based S&P 500 shed 0.8 per cent to 3,898.85, while the tech-rich Nasdaq Composite Index dropped 1.0 per cent to 10,852.27.
Accretive acquisitions lifted the distribution per unit (DPU) of Mapletree Logistics Trust 1.9 per cent to 2.227 Singapore cents for the third quarter ended December, its manager announced on Thursday (Jan 19). Gross revenue for the quarter was up 8 per cent to S$180.2 million, thanks to acquisitions completed in Q1 and the prior year. In line with the higher topline, net property income rose 7.3 per cent to S$157.2 million. This growth was however offset by the depreciation of foreign currencies, including the Japanese yen, South Korean won and Chinese yuan, against the Singapore dollar.
Comment: Short-term demand for warehousing, especially government stockpiling of supplies such as rice, have fallen from pandemic highs. Demand is now coming from cold storage and pharmaceuticals. MLT is targeting to recycle S$200 million-400 million worth of assets over FY23/24. Occupancy is expected to remain flattish, while the concern going forward is about rental reversions, especially for its China assets.
The closing date for the mandatory cash offer of property player Chip Eng Seng by its chairman Celine Tang and her husband Gordon Tang has been extended from Thursday (Jan 19) to Feb 2. In a Thursday bourse filing, the offeror disclosed that together with its concert parties, it owns or is set to own 685.2 million shares, translating to about 87.26 per cent of the company. The Tangs are required to attain more than 90 per cent of Chip Eng Seng’s shares to take it private. Launched under the vehicle Tang Dynasty Treasure, the offer is priced at S$0.75 per share. The stock ended Thursday flat at that same price.
Medtecs International Corporation warns that it is likely to incur a “significant net loss” for 2HFY2022, as the producer of personal protective equipment got to make inventory provisions of some US$12 million. According to Medtecs International, the continued easing of the Covid-19 restrictions has led to lower demand and average selling price of these products globally. Nonetheless, Medtecs says its overall financial position, including cash flow and operations are in a “good and stable condition”.
Property player GuocoLand on Thursday (Jan 19) reported a 13 per cent fall in net profit to S$59 million for the first half ended December, in the absence of a S$14.3 million disposal gain recorded the year prior. Excluding the disposal gain, the company saw its net profit rise 11 per cent, from S$53.2 million to S$59 million, on the back of a strong property market and a revival of tourism. This lifted revenue 46 per cent in H1 to S$661.6 million. The company’s property development business posted a 45 per cent increase in revenue to S$550.4 million, thanks to higher progressive recognition of sales from its residential projects in Singapore. The company’s gearing stood at 0.9 times as of end-2022.
Malaysia’s central bank maintained the overnight policy rate (OPR) at 2.75 per cent on Thursday (Jan 19), surprising economists who had anticipated yet another hike of 25 basis points (bps). They are now split on whether this is a temporary pause or an end to the hiking cycle. The central bank said the decision would allow the country’s Monetary Policy Committee to assess the impact of the cumulative past OPR adjustments, given the lagged effects of monetary policy in the economy. In a Reuters poll of 27 economists, all but one – who correctly predicted a pause – had expected Bank Negara to hike the OPR to 3 per cent, in an effort to contain inflation and provide support to the ringgit.
Indian conglomerate Adani Group, owned by billionaire Gautam Adani, said on Thursday (Jan 19) that it had no plans to enter the country’s telecommunications sector. Adani, dubbed the world’s third-richest man by Forbes, has been diversifying his empire from ports to energy, and now media. However, the Adani Group has stayed away from India’s telecoms sector, where Jio – owned by rival Mukesh Ambani’s Reliance Industries – is a dominant player. It rose to the top by offering low-cost services.
Application for US unemployment benefits unexpectedly fell last week, sliding to the lowest level since September and underscoring a strong jobs market where many businesses are reluctant to let go of workers. Initial unemployment claims decreased by 15,000 to 190,000 in the week ended Jan 14, Labor Department data showed Thursday (Jan 19). The median forecast was for 214,000 applications. Continuing claims, or the number of people who have already filed an initial application and are now claiming unemployment benefits, rose to 1.65 million in the week ended Jan 7. That followed back-to-back declines in the previous two weeks.
Procter & Gamble reported year-over-year declines in revenue and profit on Thursday, as higher prices look to offset declining sales volumes. For the three-month period ended Dec. 31, the company reported net income of $3.9 billion, or $1.59 per share, excluding items, down from $4.22 billion, or $1.66 per share, a year earlier. Net sales fell to $20.77 billion, a 1% decrease from the previous year, which topped analyst’s projections of $20.73 billion. The company’s organic revenue, which excludes the impact of foreign currency, acquisitions and divestitures, increased 5% during the fiscal second quarter. That rise was a result of higher pricing, which outweighed shrinking consumer demand.
Google on Thursday (Jan 19) lost its fight in India’s Supreme Court to block an antitrust order, in a major setback that will force the US tech giant to change the business model of its popular Android operating system in a key growth market. The Competition Commission of India (CCI) ruled in October that Google, which is owned by Alphabet, exploited its dominant position in Android and told it to remove restrictions imposed on device makers, including related to pre-installation of apps. It also fined Google US$161 million. Google challenged the order in the Supreme Court, saying it would hurt consumers and its business. It warned growth of the Android ecosystem could stall and it would be forced to alter arrangements with more than 1,100 device manufacturers and thousands of app developers.
Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR
FAANGM Monthly December 22 – Sluggish end to the year
Recommendation: NEUTRAL (Maintained); Analysts: Jonathan Woo, Maximilian Koeswoyo, Zane Aw, Phillip Research Team
– The FAANGM was down 10.0% in December, lagging both the S&P 500 and Nasdaq, which were down 5.9% and 9.1% respectively. FAANGM also lagged in 2022, down 39%, compared to the S&P 500 and Nasdaq, which were down 19% and 33%.
– AMZN, GOOGL, and AAPL were the laggards, down 13.0%/12.6%/12.2% respectively, with concerns over lingering supply chain issues and worries over AWS performance as companies look to pull back on spending. META was the biggest gainer, up 0.8%.
– With FAANGM earnings yield continuing to look less attractive vs the US10Y treasury yield, and valuation compression expected to continue given the uncertainty surrounding earnings growth, we maintain our NEUTRAL rating on FAANGM.
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